Target: ₹425
CMP: ₹357.50
We upgrade to Buy from Add and raise our TP by 16 per cent to ₹425.
We reiterate our positive view on the back of a steady outlook and attractive valuation. While the high Dahej utilisation of Q1, driven by the power sector has cooled-off, we believe around 100 per cent utilisation is achievable for remainder of the fiscal.
The commencement and ramp up of Exxon’s second 1.2mmtpa term contract with higher Kochi tariff in FY26-27, leads to our EPS increasing 7-9 per cent for that period. PLNG’s tariff outlook following QatarGas renewal in CY28 has been a concern with offtakers seeking downward adjustments.
However, the management has reiterated any cut won’t be material and minority shareholder interests would be protected. We build in reasonable assumptions, but still see value in the stock.
We note that PLNG has 7.5mmtpa of QatarGas contract, 8.25mmtpa of tolling and 2.6mmtpa of Exxon (Gorgon) contracts. Of this, the 7.5mmtpa has tariff adjustment risks while hikes should continue for the other two. Assuming a scenario where Kochi tariff is cut by about 10 per cent in FY27 due to Exxon volumes and Dahej 7.5mmtpa is cut by 10 per cent in FY29 along with a 2-3 per cent annual tariff hike for the next 10 years, our DCF value for the stock still increases to ₹400 from ₹365 earlier.