Petronet LNG - Business...

Company Report Industry: Oil & Gas

Avishek Datta ([email protected]) +91-22-66322254

Petronet LNG Play on India's evolving gas story

December 16, 2015 2

Petronet LNG

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.

Please refer to important disclosures and disclaimers at the end of the report

Contents Page No.

PLNG’s prospects look up ........................................................................................... 4

Domestic gas volume outlook continue to remain muted ................................................................ 4

Even as global LNG supplies set to rise by 150MTPA over next decade ........................................... 5

Meanwhile domestic demand set to grow sharply ........................................................................... 6

Pooling demand at 5-6mmscmd in Q2FY16, likely to increase ~10mmscmd .............................. 7

All these factors augurs well for LNG import players ........................................................................ 7

PLNG in a sweet spot ......................................................................................................................... 8

High share of committed volumes give earnings visibility ................................................................ 8

PLNG’s earnings trajectory to move up sharply ................................................................................ 9

Capacity expansion to drive the next phase in FY18E ..................................................................... 11

Risk ............................................................................................................................ 12

Rasgas contract imbroglio ............................................................................................................... 12

Low capacity utilisation at the Kochi terminal ................................................................................ 12

Sensitivity to spot tariffs .................................................................................................................. 13

Financial analysis ...................................................................................................... 14

Valuation ................................................................................................................... 15

Petronet LNG

Company Report December 16, 2015

Rating BUY

Price Rs241

Target Price Rs300

Implied Upside 24.5%

Sensex 25,494

Nifty 7,751

(Prices as on December 16, 2015)

Trading data

Market Cap. (Rs m) 180,750.0

Shares o/s (m) 750.0

3M Avg. Daily value (Rs m) 315.3

Major shareholders

Promoters 5.00%

Foreign 22.45%

Domestic Inst. 5.09%

Public & Other 22.46%

Stock Performance

(%) 1M 6M 12M

Absolute 17.8 37.6 29.4

Relative 18.8 42.1 34.2

How we differ from Consensus

EPS (Rs) PL Cons. % Diff.

2017 13.8 14.4 -4.0

2018 24.3 21.4 13.3

Price Performance (RIC: PLNG.BO, BB: PLNG IN)

Source: Bloomberg

0

50

100

150

200

250

300

De

c-1

4

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

(Rs)

In a sweet spot: Petronet LNG (PLNG), India’s largest LNG regassification player,

is a play on India’s evolving gas market. Confluence of weak domestic gas

volume outlook, soft global spot LNG prices and rising domestic demand from

user industries mean that LNG demand will keep increasing and so is the LNG

imports. Also, government initiatives to revive stranded power and fertiliser

plants by importing LNG offer additional support. Accordingly, PLNG with its

first-mover advantage, ability to ramp-up volumes at affordable cost and high

share of long-term committed revenues (~79% of FY18 revenues) mean that the

company is in a sweet spot.

Favourable enviorment going forward: Global spot LNG prices have come off to

~US$8/mmbtu (~US$15-20/mmbtu in FY15) led by weakening demand in Japan

and South Korea along with rising supplies from US and Australia. India with

constrained gas supply outlook is ideally placed to capitalise on the opportunity.

Accordingly, India’s LNG regassification capacity is set to double to 45MTPA by

FY20 led by new capacity ramp up and PLNG with lowest cost structure- new

green field capex/ton is over 2x PLNG’s aggregate levels, is best placed.

Earnings momentum to gather pace: PLNG’s PBT is to increase at 40%CAGR

over FY15-18E (after 24% CAGR PBT drop over FY13-15) supported by rising

volumes and higher margins. PLNG’s near term earnings are to ride on increased

spot volumes due to drop in spot LNG prices. Meanwhile, capacity expansion at

Dahej to 15MTPA (10MTPA currently), to be commissioned by FY17 will drive

medium term earnings; FY18 PBT to increase ~3x FY15 levels and ROE to expand

~650bps to 23%, in our view.

Initiate with a ‘BUY’: PLNG offers defensive growth opporunity by virtue of its

scale-up potential at attractive returns. We Initiate PLNG with ‘BUY’ and 15

month DCF based PT of Rs300.

Key financials (Y/e March) 2015 2016 2017E 2018E

Revenues (Rs m) 395,010 398,262 480,483 750,221

Growth (%) 4.6 0.8 20.6 56.1

EBITDA (Rs m) 14,390 15,628 19,710 31,175

PAT (Rs m) 8,825 8,180 10,385 18,194

EPS (Rs) 11.8 10.9 13.8 24.3

Growth (%) 24.0 (7.3) 27.0 75.2

Net DPS (Rs) 2.4 2.2 2.8 4.9

Profitability & Valuation 2015 2016 2017E 2018E

EBITDA margin (%) 3.6 3.9 4.1 4.2

RoE (%) 16.5 13.6 15.4 23.0

RoCE (%) 13.0 11.4 12.3 18.8

EV / sales (x) 0.5 0.5 0.4 0.2

EV / EBITDA (x) 14.0 12.9 10.1 6.0

PE (x) 20.5 22.1 17.4 9.9

P / BV (x) 3.2 2.9 2.5 2.1

Net dividend yield (%) 1.0 0.9 1.1 2.0

Source: Company Data; PL Research

Petronet LNG

December 16, 2015 4

PLNG’s prospects look up

PLNG is India’s largest LNG regassification player with a capacity of 15MTPA-

10MTPA at Dahej and 5MTPA at Kochi. PLNG with a first mover advantage and its

ability to ramp up capacity at low cost is best placed to capitalise on growing gas

market opportunities in the country. Meanwhile confluence of sluggish domestic

gas volume outlook, weak spot LNG prices and rising demand from domestic user

industries mean that LNG import volumes are set to increase sharply in medium

term. With the Dahej capacity expansion set to be commissioned by FY17E, PLNG’s

PBT will increase 40.2% CAGR over FY15-18E and ROEs will improve 650bps to 23%

in FY18E, in our view.

Domestic gas volume outlook continue to remain muted

Domestic volumes have been on a downslide since RIL’s KGD6 volumes came off

because of reservoir pressure concerns. Low domestic gas prices have added to

gloom as it discourages E&P players to invest aggressively. Recent gas price

discovery of US$4.2/mmbtu for H2FY16 for domestic sources mean that deep water

exploration activity will take a backseat as companies evaluate their investment

strategy.

Exhibit 1: Domestic gas volumes remain sluggish

62 63 63 64 65 64 60

8 7 6 6 5 4 414 14 12 10 9 8 8

6 7 6 7 7 7 70

39 5543

2614 12

0

20

40

60

80

100

120

140

160

FY09 FY10 FY11 FY12 FY13 FY14 FY15

(mm

scm

d)

ONGC ONGC-JV Others OIL India RIL

Source: PL Research, Company Data

Meanwhile, some volume expansion will happen from investments ONGC made to

develop their gas portfolio- KG basin (KG-DWN-98/2), B- & C-clusters and Daman

offshore blocks. Further, North & South Re-development Phase 3 of Mumbai High,

KG-offshore blocks and Mahanadi basin (MN-DWN-98/3) may also add to the

domestic supplies over the long term. Some of the volumes will make up for volume

declines due to mature fields. Accordingly, we expect domestic volumes to stay

weak at ~100mmscmd by FY20E as ramp-up gets pushed back.

Petronet LNG

December 16, 2015 5

Exhibit 2: Domestic volumes likely to remain weak

60 63 66 67 68 68

4 4 4 3 3 28 7 7 6 5 47 8 8 9 9 912 12 12 14 14 14

0

20

40

60

80

100

120

FY15 FY16E FY17E FY18E FY19E FY20E

(mm

scm

d)

ONGC ONGC-JV Others OIL India RIL

Source: Company Data, PL Research

Even as global LNG supplies set to rise by 150MTPA over next decade

Global LNG market is set to be in an oversupply as over 150MTPA of new LNG

supplies come on stream over the next decade (Source: Wood Mackenzie); current

global LNG trade/consumption at ~240MTPA.

Most of the supplies are expected from US and Australia where new supplies are to

start by early 2016. US is expected to witness maximum volume growth to 94MTPA

against current capacity of ~1MTPA. Australia will also see addition of 55MTPA over

next decade even as Qatar, currently the largest producer will see volume

moderation.

Exhibit 3: Global LNG supplies expected to remain strong

171

77

261.4

275

189

68 81 94

432

0

100

200

300

400

500

Rest of world Qatar Australia US Total

(MT

PA

)

2014 2025

Source: PL Research, Wood Mackenzie

Petronet LNG

December 16, 2015 6

Even before the massive supplies comes on-stream, spot LNG prices have come off

to US$7-8/mmbtu as weak demand has accentuated the spot LNG market scenario.

Reports of restart of Japanese nuclear plants have added to the gloom as Japan is

the largest LNG importer at 89.2MTPA or 37% of total demand.

Exhibit 4: Spot LNG prices have come off sharply

18

1615

14

12 1113

1514

1210

8 8 8 8 8 89 9

0

4

8

12

16

20

Apr

14

Ma

y 1

4

Jun

14

Jul 1

4

Aug

14

Sep

14

Oct

14

Nov

14

Dec

14

Jan

15

Feb

15

Ma

r 1

5

Apr

15

May

15

Jun

15

Jul 1

5

Au

g 1

5

Sep

15

Oct

15

(US$

/ m

mbt

u)

Source: Bloomberg, PL Research

Meanwhile domestic demand set to grow sharply

Domestic gas demand trend is likely to improve significantly as more sectors try to

capitalise on soft spot LNG prices. Accordingly, domestic gas demand is set to triple

by FY22E to 353mmscmd against FY15 demand of 117mmsmcd (Source: GAIL) led by

increased power and fertiliser sector demand. That apart sustained demand from

non-priority sectors like petrochemicals and refiners will also support LNG volumes.

Exhibit 5: Domestic gas demand was at 117mmscmd in FY15

Fertiliser42

Power

28

CGD16

Petrochem4

Sponge iron27

Source: GAIL, PL Research

Exhibit 6: Domestic gas demand set to triple by FY22

Fertiliser125

Power

124

CGD

51

Petrochem28

Sponge iron25

Source: GAIL, PL Research

Petronet LNG

December 16, 2015 7

Also, Government initiatives to support the stranded power and fertiliser plants

augur well for LNG imports. In India, of the 24,150MW of the gas grid connected

power generation capacity, 14,305MW capacity has no supply of domestic gas, while

the remaining 9,845MW capacity operates at less than 30% utilisation. To improve

their fortunes, the government has approved gas pooling.

Pooling demand at 5-6mmscmd in Q2FY16, likely to increase ~10mmscmd

In Q2FY16, gas pooling demand of power plants was at 5-6mmscmd for PLNG. The

company expects further demand of ~10mmscmd due to gas pooling from the

second round of bidding, albeit some volume will also move to the Dabhol LNG

plant.

All these factors augurs well for LNG import players

Confluence of weak domestic supplies along with improving demand augurs well for

the LNG regassification players like PLNG. To meet increased domestic demand, LNG

regassification capacity is set to double over FY15-20E led by debottleneckening at

PLNG-Dahej and Shell Hazira capacities. Also, Greenfield LNG terminals are likely to

come on stream at Mundra and Ennore. Meanwhile, media reports suggest that a

5MTPA Floating Storage and Regassification Unit (FSRU) are scheduled to be

commissioned at Kakinada. However, PLNG with its creeping capacity enhancement

will remain the largest player in the field.

Exhibit 7: India's LNG regas capacity set to double by FY20

10.0 10.0 10.0 15.0 15.0 17.5

5.0 5.0 5.0 5.0 5.0

5.0 2.5 2.5 5.0

5.0 5.0 5.0

5.0 5.0 7.5

7.5 7.5 7.5

5.0 5.0 5.0

5.0 5.0

-

10.0

20.0

30.0

40.0

50.0

FY15 FY16 FY17 FY18 FY19 FY20

(MTP

A)

Petronet LNG-Dahej Petronet LNG-Kochi RGPPL-Dabhol

Shell-Hazira GSPC Mundra IOC-Ennore

Source: PL Research, Company Data

Petronet LNG

December 16, 2015 8

PLNG in a sweet spot

PLNG with a first mover advantage is also the lowest cost LNG regassification player

in the country. The company has been gradually adding capacity at attractive cost in

Dahej to capitalise on the evolving opportunities. Expanding capacities at Dahej at a

low cost means that PLNG is best placed to compete with new green field players

where the capex/ton is over 2x PLNG’s aggregate levels.

Exhibit 8: PLNG's Dahej terminal is the lowest cost operator

Year Capacity (MTPA)

Capex (Rs m)

Capex/MTPA (Rs)

PLNG-Dahej FY05 5 19,000 3,800

PLNG-Dahej expansion FY10 5 16,500 3,300

PLNG-Dahej jetty FY15 2 10,500 5,250

PLNG-Dahej expansion FY18E 5 24,000 4,800

PLNG-Dahej expansion FY20E 2.5 15,000 6,000

Total Dahej

19.5 85,000 4,359

PLNG-Kochi FY14 5 42,000 8,400

GAIL-Dabhol FY13 5 40,000 8,000

Shell Hazira FY06 5 30,000 6,000

GSPC-Mundra FY18E 5 50,000 10,000

IOC-Ennore FY19E 5 51,500 10,300


High share of committed volumes give earnings visibility

PLNG has taken a strategic decision to contract out volumes on long-term basis.

Accordingly, ~79% or 15.75MTPA of its FY18 regassification capacity is already

contracted for long-term leases which gives PLNG’s earnings high visibility. The initial

capacity of 7.5MTPA at Dahej was booked by GAIL, IOC and BPCL in 60%/30%/10%

ratio. Subsequently, PLNG has entered into contracts with GAIL, GSPC, IOC, BPCL and

Torrent Power to book 15.75MTPA of expanded capacity of 15MTPA.

Exhibit 9: PLNG's contract status

(MTPA) Dahej initial Expansion (FY18E) Total

GAIL 4.5 2.5 7.0

IOC 2.3 1.5 3.8

BPCL 0.8 1.0 1.8

GSPC 2.3 2.3

Torrent Power 1.0 1.0

Total 7.5 8.3 15.8


Petronet LNG

December 16, 2015 9

PLNG’s earnings trajectory to move up sharply

PLNG’s earnings after lows of FY15 are set to bounce-back.-PBT growth over FY15-

18E will be robust at 40% CAGR, in our view. This is due to higher spot regas

volumes, a function of higher demand from user industries as spot LNG prices

collapse to ~US$8/mmbtu against recent levels of US$15-20/mmbtu. PAT growth,

however, will be lower at ~27% CAGR over FY15-18E due to low tax effect boosting

FY15 earnings; FY15 tax rate at 10% due to tax write-back against FY10-14 levels of

33%.

FY16 volumes hit by high cost long-term contract price: Rasgas has a long-term

contract with PLNG for 7.5MTPA who, in turn, has back-to-back agreement with its

offtakers- GAIL, IOC and BPCL. The, Rasgas contracted price currently stands at

~US$13/mmbtu, based on five-year rolling averge of Japanese Crude cocktail (JCC).

This is against spot gas prices of ~US$8/mmbtu. The end user preference for cheaper

spot LNG volumes have meant that for 9MCY15, Rasgas volume offtake stands at

68%.

but spot volumes take its place: Led by falling long-term volumes, PLNG is actively

targeting spot volumes. Increased demand from user industries has meant that

Q2FY16 PLNG’s regassification volumes were at record levels of 157tbtu.

Exhibit 10: Increased spot volumes will make up for lower contracted off take

92 92 96 94 94

60 67 63

19 21 17 26 19

1526 22

18 525

3128

21

3972

0

40

80

120

160

200

Q1FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16

(tbu

)

Contract Spot/short Regas service Reload


Spot tariffs also edging up: Strong demand for spot volumes have pushed up the

spot tariffs -tariffs have increased to Rs33.4/tbtu for H1FY16 against FY15 levels of

Rs29.1. We have factored in spot tariffs of Rs35/tbtu for FY16/17E.

Petronet LNG

December 16, 2015 10

Exhibit 11: PLNG's spot tariffs have edged up from FY15 lows

39.0 40.8 40.0

54.6

21.1 22.819.5

30.635.4

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16

(Rs/

tbtu

)


Contract resolution to solve the concerns on long-term volumes

Media reports suggests that contract renegotiation has been reached between PLNG

and Rasgas wherein the long-term contracted LNG prices will come down to spot

prices of US$8/mmbtu. This is important as high priced contracted volumes had led

to consumers shifting to lower priced spot volumes; 9MCY15 volume off-take at

68%. For FY17E we have assumed full lifting of the contracted volumes of 8.75MTPA.

Exhibit 12: Dahej's long-term volumes

5.6

8.58.14

8.75

7.0

8.8

0.0

2.0

4.0

6.0

8.0

10.0

FY10 FY13 FY14 FY15 FY16E FY17E

MTP

A


Petronet LNG


Capacity expansion to drive the next phase in FY18E

PLNG’s next phase of earnings growth will be led by expansion of the Dahej terminal

to 15MTPA, scheduled to be commissioned by FY17E; we have factored in FY18E

commissioning. Also, the company plans to further ramp-up the Dahej capacity to

17.5MTPA; we have factored in incremental volume by FY20E.

PLNG’s earnings stream is highly secured as the Dahej terminal has been booked for

15.75MTPA towards long term from FY18E- GAIL, IOC, BPCL, GSPC, Torrent Power –

are the off takers.

Exhibit 13: PLNG's volume ramp-up

8.87.0 7.9

15.8 15.8 15.81.3

3.03.0

1.0 2.0 2.0

0.0 0.20.2

0.21.0 1.5

0.0

5.0

10.0

15.0

20.0

25.0


(MTP

A)

Dahej contract Dahej spot Kochi contract Kochi spot


Supported by robust volume growth and stable tariffs we expect PLNG’s PBT to

increase 2.1x over FY15-18E, while the PBT will increase 2.8x FY15 levels. Supported

by earnings move, we expect ROEs to expand 650bps to 23% in FY18E. Full blown

earnings are expected by FY20E when we expect PBT to increase ~3.8x FY15 levels.

Exhibit 14: PLNG's earnings growth to ride on new capacity

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0.0

5.0

10.0

15.0

20.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

(Rs

bn)

PAT PBT Growth (RHS)


Petronet LNG


Risk

Rasgas contract imbroglio

PLNG’s long term contract volumes from Rasgas face uncertain outlook, given the

sharp drop in spot LNG prices, currently at ~US$7-8/mmbtu. This is against Rasgas

contracted price of ~US$13/mmbtu, based on 5-year rolling averge of Japanese

Crude cocktail (JCC). End user preference for cheaper spot LNG volumes have meant

that for 9MCY15, Rasgas volume offtake stands at 68%.

Exhibit 15: Rasgas contracted prices under present pricing mechanism

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

(USD

/mm

btu)

Source: Bloomberg, PL Research

Media reports suggests that a negotiated settlement have been found because of

which contracted LNG prices will come off to US$8/mmbtu based on 3month rolling

basis. Also, reports suggest that penalties from lower offtake of US$1bn would be

waived off/subsequently paid.

This is positive for PLNG as cheaper contracted LNG prices would spur demand from

committed users. Also solution to penalty, albeit passed on to offtakers would lift an

overhang over PLNG’s financials given limited bandwidth in PLNG’s balance sheet-

FY15 net worth is at Rs57bn (US$875m).

Low capacity utilisation at the Kochi terminal

PLNG’s Kochi terminal, commissioned in FY14 has been stuck with low utilisation

levels since due to pipeline connectivity issues. Low terminal utilisation levels have in

turn impacted the overall profitability of the company. Meanwhile, recently the

Kerala government has approved laying of pipeline connecting Mangalore market.

This is a significant move as it will open up the 1.5MTPA demand opportunity.

Petronet LNG


PLNG expects the pipeline to be completed 18 months from the approval date. We

have factored in 0.4/0.5/0.5MTPA total volumes for FY16/17/18E with volume

improving to 1.5MTPA in FY19E. Meanwhile, continued delay in utilisation levels of

Kochi is a risk.

Exhibit 16: PLNG sensitivity to Kochi volumes

Base case FY16 volume (MTPA) Sensitivity- volume (MTPA) Impact

Kochi-volumes 0.4 0 8%

Source: PL Research

Sensitivity to spot tariffs

PLNG’s earnings stream is highly secure, given the high concentration of long term

volumes - ~60% of FY15 volumes. Post the commissioning of the expanded capacity

at Dahej; the contracted volumes will form ~79% of FY18E earnings stream. While

the long-term tariffs are guaranteed for 5% escalation, the spot tariffs are a function

of market opportunity. Spot tariffs have come off FY13 highs of ~Rs60/tbtu to

Rs27/tbtu in FY15. Since then they have recovered to Rs33/tbtu for H1FY16.

Exhibit 17: Spot tariff sensitivity

Base case FY16E Sensitivity FY16E EPS Impact

Spot tariffs (Rs/tbtu) 35 30 -7%

Source: PL Research

Petronet LNG


Financial analysis

PLNG’s FY15-18E PBT is set to rise 40% CAGR led by improving spot revenues, higher

tariffs and commissioning of new capacity expansion at Dahej. However, PAT impact

will be more muted at 27% during the same period. Key drivers for the earnings are:

Higher spot regassfication tariffs at Rs35/tbtu for FY16/17E will support

earnings.

PLNG’s long term contract tariffs are escalated 5% every year; FY16/17 tariffs

are at Rs41/43.1/tbtu against Rs39.1 for FY15.

Capacity addition at Dahej would also add to earnings from FY18E.

Exhibit 18: PLNG key assumptions


Contract volume-MTPA

Dahej 8.8 7.0 8.8 15.8 15.8 15.8

Kochi 0.0 0.2 0.2 0.2 1.0 1.5

Spot volume-MTPA

Dahej 1.3 3.0 2.5 1.0 2.0 2.0

Kochi 0.2 0.2 0.3 0.3 0.5 0.5

Contract tariff -Rs/tbtu

Dahej 39.1 41.0 43.1 45.2 47.5 49.9

Kochi 60.0 60.0 60.0 60.0 60.0 60.0

Dahej spot tariff-Rs/tbtu 27.0 35.0 35.0 27.0 25.0 25.0


Petronet LNG


Valuation

We initiate PLNG with a ‘BUY’ and DCF based 15 month price target of Rs300. We

value PLNG on DCF basis, given the high earnings visibility from steady earnings

stream. PLNG offers defensive growth opporunity by virtue of its scale up potential

at attractive returns. With earnings tracking capacity addition which is set for a step

jump in FY18E, PLNG offers medim term investment opportunity.

Exhibit 19: PLNG DCF

FY15 FY16E FY17E FY18E FY19E FY20E FY121E FY22E FY23E FY24E FY25E

EBITDA (Rs m) 19,141 20,252 15,821 15,937 17,055 21,475 33,161 38,468 43,321 47,793 53,379

Current tax (Rs m) (10,575) (11,492) (7,119) (8,825) (8,180) (10,385) (18,194) (21,871) (25,216) (28,253) (32,224)

Total capex (Rs m) 386 5,194 (11,394) (444) (7) (187) (613) (164) (56) (20) 48

Total free cash flows (Rs m) 8,952 13,954 (2,692) 6,669 8,868 10,903 14,354 16,433 18,049 19,520 21,203

WACC 11.7%

Terminal growth rate 1.0%

Terminal value 279,976

Terminal EV/E 7.4

PV of terminal value 129,923

PV as % of EV 56.9%

Enterprise value 228,220

Net debt as on Mar 16 4,360

Equity value 223,860

Value per share 298


Petronet LNG


Income Statement (Rs m)

Y/e March 2015 2016 2017E 2018E

Net Revenue 395,010 398,262 480,483 750,221

Raw Material Expenses 358,547 360,722 434,800 680,784

Gross Profit 36,463 37,540 45,682 69,437

Employee Cost 571 657 755 868

Other Expenses 21,502 21,255 25,217 37,393

EBITDA 14,390 15,628 19,710 31,175

Depr. & Amortization 3,154 3,352 3,362 3,818

Net Interest 2,935 2,724 2,613 2,188

Other Income 1,548 1,427 1,764 1,986

Profit before Tax 9,849 10,979 15,500 27,155

Total Tax 1,024 2,800 5,115 8,961

Profit after Tax 8,825 8,180 10,385 18,194

Ex-Od items / Min. Int. — — — —

Adj. PAT 8,825 8,180 10,385 18,194

Avg. Shares O/S (m) 750.0 750.0 750.0 750.0

EPS (Rs.) 11.8 10.9 13.8 24.3

Cash Flow Abstract (Rs m)

Y/e March 2015 2016 2017E 2018E

C/F from Operations 14,470 14,248 16,173 23,587

C/F from Investing (6,354) (9,896) (9,225) (5,173)

C/F from Financing (16,797) 2,640 (4,690) (15,827)

Inc. / Dec. in Cash (8,681) 6,992 2,258 2,587

Opening Cash 12,327 3,641 10,633 12,891

Closing Cash 3,641 10,633 12,891 15,478

FCFF 1,612 11,024 13,560 (2,601)

FCFE (10,450) 18,024 13,560 (12,601)

Key Financial Metrics

Y/e March 2015 2016 2017E 2018E

Growth

Revenue (%) 4.6 0.8 20.6 56.1

EBITDA (%) (4.0) 8.6 26.1 58.2

PAT (%) 24.0 (7.3) 27.0 75.2

EPS (%) 24.0 (7.3) 27.0 75.2

Profitability

EBITDA Margin (%) 3.6 3.9 4.1 4.2

PAT Margin (%) 2.2 2.1 2.2 2.4

RoCE (%) 13.0 11.4 12.3 18.8

RoE (%) 16.5 13.6 15.4 23.0

Balance Sheet

Net Debt : Equity 0.4 0.3 0.2 0.1

Net Wrkng Cap. (days) — — — —

Valuation

PER (x) 20.5 22.1 17.4 9.9

P / B (x) 3.2 2.9 2.5 2.1

EV / EBITDA (x) 14.0 12.9 10.1 6.0

EV / Sales (x) 0.5 0.5 0.4 0.2

Earnings Quality

Eff. Tax Rate 10.4 25.5 33.0 33.0

Other Inc / PBT 15.7 13.0 11.4 7.3

Eff. Depr. Rate (%) 3.6 3.8 3.8 3.4

FCFE / PAT (118.4) 220.4 130.6 (69.3)

Source: Company Data, PL Research.

Balance Sheet Abstract (Rs m)

Y/e March 2015 2016 2017E 2018E

Shareholder's Funds 56,886 63,430 71,738 86,293

Total Debt 23,738 30,738 30,738 20,738

Other Liabilities 7,270 7,874 8,649 10,007

Total Liabilities 87,894 102,042 111,125 117,038

Net Fixed Assets 76,895 84,043 90,681 93,394

Goodwill — — — —

Investments 900 900 900 900

Net Current Assets 10,100 17,099 19,544 22,744

Cash & Equivalents 3,641 10,633 12,891 15,478

Other Current Assets 29,751 29,934 34,566 49,763

Current Liabilities 23,293 23,468 27,914 42,497

Other Assets — — — —

Total Assets 87,895 102,042 111,125 117,038

Quarterly Financials (Rs m)

Y/e March Q3FY15 Q4FY15 Q1FY16 Q2FY16

Net Revenue 111,985 71,617 83,772 75,450

EBITDA 3,408 2,214 3,611 4,668

% of revenue 3.0 3.1 4.3 6.2

Depr. & Amortization 793 817 801 808

Net Interest 685 667 612 612

Other Income 268 576 333 360

Profit before Tax 2,198 1,306 2,531 3,608

Total Tax 575 (1,701) 56 1,120

Profit after Tax 1,623 3,007 2,475 2,488

Adj. PAT 1,623 3,007 2,475 2,488

Key Operating Metrics

Y/e March 2015 2016 2017E 2018E

Dahej contract volume (MTPA) 9 7 9 16

Dahej spot volume (MTPA) 1 3 3 1

Kochi contract volume (MTPA) — — — —

Kochi spot volume (MTPA) — — — —

Dahej contract tariff (Rs/tbtu) 39 41 43 45

Dahej spot tariff (Rs/tbtu) 10 35 35 27

Kochi contract tariff (Rs/tbtu) 39 60 60 60

Source: Company Data, PL Research.

Petronet LNG


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Petronet LNG


Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India

Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage PL’s Recommendation Nomenclature

45.2%42.3%

12.5%

0.0%0%

10%

20%

30%

40%

50%

BUY Accumulate Reduce Sell

% o

f To

tal C

ove

rage

BUY : Over 15% Outperformance to Sensex over 12-months

Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months

Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month

Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

DISCLAIMER/DISCLOSURES

ANALYST CERTIFICATION

We/I, Mr. Avishek Datta (MBA), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:

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PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.

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Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest.

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DISCLAIMER/DISCLOSURES (FOR US CLIENTS)

ANALYST CERTIFICATION

The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report

Terms & conditions and other disclosures:

This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

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In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").

Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.

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