For 2QFY2016, Petronet LNG (PLNG)’s EBITDA came in ahead of our expectation
at Rs467cr, as against our estimate of Rs389cr, led by higher-than-expected
contribution margin. The EBITDA declined 10% yoy but was up 29% sequentially.
Contribution margin for the quarter came in at Rs37.4/MMBTU as against
Rs42.0/MMBTU in the corresponding quarter last year and vs Rs35.7/MMBTU in the
sequential previous quarter. The better-than-expected contribution was on
account of higher utilization at the Dahej terminal, which operated at ~121% of
its capacity (as against ~98% utilisation in the sequential previous quarter),
processing 154TBTU during the quarter. The Management indicated that the
increase in utilisation was temporary and should be ~100% going forward.
Blended realisation was lower at Rs481/MMBTU as against Rs637/MMBTU
in 1QFY2016 and Rs730/MMBTU in 2QFY2015, on account of lower spot
LNG prices.
Expansion plan remains on track: Expansion of capacity of the Dahej terminal
from 10MMTPA to 15MMTPA is going on as per schedule and the Management
expects to complete the same by 2016-end. The company has also initiated the
process for selection of EPC contractors for further expansion of the Dahej
terminal’s capacity to 17.50 MMTPA.
Outlook and valuation: PLNG is a direct play on the gas deficit story in India. The
company’s strong expansion plan makes it well positioned to benefit from the
demand supply gap. The stock currently trades at 15x and 14x its FY2016E and
FY2017E EPS. We use DCF to arrive at our target price of Rs210 and retain our
Accumulate rating on the stock.

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