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Petronet LNG 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Petronet LNG (PLNG) reported a robust growth in profitability on account of higher margins on short-term/spot volumes. We recommend an Accumulate rating on the stock.

R-LNG volumes decline 3.4% yoy: During 3QFY2013, PLNG’s R-LNG volumes fell by 3.4% yoy to 140TBTUs. The contractual volumes stood at 97TBTUs, while spot cargo and tolling volumes stood at 43TBTUs. Although volumes declined, average realization increased by 39.3% yoy to Rs.602/mmbtu and therefore, net sales increased by 33.1% yoy to Rs.8,423cr.

Higher LNG costs mute bottom-line growth: The EBITDA/mmbtu decreased by 3.3% yoy to Rs.37.8 and the EBITDA margin declined by 167bp yoy to 6.3% in 3QFY2013. The cost of LNG regasified increased by 37.0% yoy to Rs.7,809cr. Hence, despite a higher growth in net sales, the EBITDA increased by only 5.1% yoy to Rs.529cr. Other income decreased by 9.1% yoy to Rs.15cr, while the tax rate fell to 31.9% in 3QFY2013, compared to 32.7% in 3QFY2012. Hence, the net profit grew by 7.8% yoy to Rs.319cr.

Outlook and valuation: PLNG is well-poised to benefit from the gas demand-supply mismatch in the country. It has also lined up aggressive capex plans to increase capacity from 10.0mn tonne to 17.5mn tonne over the coming three-four years. The stock is currently trading at 10.5x FY2013E and 10.4x FY2014E EPS. Valuing the stock at 11.5x FY2014E earnings, we derive a target price of Rs.179 and recommend an Accumulate rating on the stock.