Petronet LNG reported another strong quarterly result for 3QFY13, driven by marketing/efficiency gains. EPS of R4.25 beat Bloomberg consensus/ our estimate by 7%/9%. Capacity utilisation remains high at 110% and earnings will likely get better in 4QFY13 given the increase in the re-gas tariff from January 1.
The earnings surprises keep coming, owing to efficiency gains (on account of higher utilisation) and marketing gains (ability to extract high margins due to strong LNG demand and declining domestic production). With domestic volume declines continuing and limited new LNG capacity additions, we think demand for LNG will remain strong and the company will continue to report high efficiency/marketing gains, in near term.
With reported 9M EPS at R12.1, FY13 EPS will likely easily exceed R16. We revise our FY13F EPS forecast to R16.3. We think the street (Bloomberg consensus is at R14.8) will follow. We view PLNG as a key stock to play the rising LNG import story. With the stock at 10x trailing P/E, valuation is undemanding.
The new 5mmtpa Kochi terminal starts in 1QFY14; ramp-up will likely be slow due to lagging downstream pipeline progress. The 2nd jetty at Dahej (to raise capacity by ~30% to 13mmtpa) will be completed in 4QFY14 and ramp-up will likely be immediate. A FY14F earnings decline (on interest/ depr charges for Kochi) is well known and factored in, but focus will likely soon shift to FY15F, when we expect the impact of the new capacities.
We raise FY13F/FY14F EPS by 16%/10% as we align with reported 9M numbers and raise our marketing margin assumptions. With domestic gas volume declines continuing and LNG demand strong, we think marketing gains will remain high near term. After an EPS decline of 12% in FY14F, we see a sharp 33% increase in FY15F. We also roll-forward our DCF valuation to FY15F end. Maintain Buy with target price of R225.
Nomura
