Imports at the larger 10-mt Dahej terminal have been resilient, while its risk profile has improved, with Petronet pre-selling nearly all the expanded 15-mt capacity slated for start-up in 2016. With Petronet trading at 10x P/E on FY15E EPS, which we estimate could double by FY18E, the risk-reward looks favourable. We thus upgrade our rating to overweight from equalweight, but leave our DCF-based price target at R140, as we roll over to March 15 and incorporate additional TOP contracts, which offset our near-term EPS cuts.
Our TP implies 35% potential upside from current levels. Petronets 5-mtpa, cR4,500-crore Kochi terminal may continue to struggle for some time. Gails KKBM evacuation pipeline may now be completed only by mid-2015, limiting utilisation, while the high LNG price from Kochi could limit offtake, even if evacuation issues are resolved. We cut FY14-16E EPS by 11-22%, but believe that the stocks 33% fall in the last one year factors in the headwind.
Encouragingly, operations at the more important 10mt Dahej site remain resilient, with utilisation of +95% for FY14E.