ICICIdirect has recommended `Hold` on Petronet LNG with a price target of Rs 175 as against the current market price (CMP) of Rs 163 in its report dated Jan. 30, 2012. The broking house gave the following rationale:
Petronet LNG reported strong Q3FY12 numbers with revenues increasing 74.5% YoY to Rs 6.330 billion while PAT increased 72.9% to Rs 2.95 billion in Q3FY12. The results were higher than our estimates mainly on account of higher capacity utilisation and marketing margins. Regasification services volumes were 21.8 tbtu vs. 8.6 tbtu YoY, which also contributed towards the topline growth. LNG volumes increased 21% YoY to 144.9 tbtu in Q3FY12. The interest expense of Rs 345 million was lower than our estimates, mainly on account of prepayment of debt of Rs 5 billion. Blended net regasification margins increased from Rs 32.5 per mmbtu in Q3FY11 to Rs 43.4 per mmbtu in Q3FY12. Gross regasification margins increased 5% YoY to Rs 33.4 per mmbtu in Q3FY12. We estimate LNG volume of 553.6 tbtu and 580.3 tbtu in FY12E and FY13E, respectively. We recommend a HOLD rating with a price target of Rs 175.
> Highlights of the quarter
Petronet LNG reported a 21% increase in LNG volume from 119.7 tbtu in Q3FY11 to 144.9 tbtu in Q3FY12 on account of higher long term and regasification services volumes during the quarter. The volume for regasification services stood at 21.8 tbtu in Q3FY12 (17.2 tbtu in Q2FY12). The 5 MMTPA Kochi terminal has achieved 95% completion and is expected to start commercial operations in Q3FY13E. The new jetty at the Dahej terminal would be ready for commissioning in FY14E. The Petronet Board has approved the feasibility report for the expansion of the Dahej terminal to 15 MMTPA. It has also granted consent to start internal feasibility for setting up a new 5 MMTPA LNG terminal in the east coast of India at Gangavaram in Andhra Pradesh.
Petronet LNG`s business of receiving and regasification of LNG along with back-to-back long-term purchase and sales agreement offers a lot of safety to investors. We have valued the stock based on DCF methodology (WACC - 10.6%, terminal growth -2%) to arrive at a target price of Rs 175.
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