Centrum Broking
Petronet LNG (Sell)
CMP: ₹371.4
Target: ₹280
Petronet LNG has reported a robust 124.1 per cent capacity utilisation at Dahej vs 129.6 per cent in the first quarter of current fiscal and slightly higher than our estimate of 120.9 per cent. We infer positive trading/marketing margins which was a surprise for the street and hence higher than our and street’s estimated earnings. Additionally, reloading income at Kochi and higher MTM treasury income boosted PAT. Hereon, we expect utilisation at Dahej to taper-off on a higher base of nameplate capacity. Historically, Petronet has traded at higher valuations when RoE was in excess of 28 per cent; however, low RoE over the forecast period, lack of pricing power, trading at Mean+SD on PE multiples on one-year forward basis, risk of hair-cut in regas tariffs and risk of non-recovery of take-pay charges make us underweight.