Kochi volumes were flattish q/q in 2QFY22 after volumes had risen in 1QFY22 helped by full impact of pipeline connectivity in early 2021. But utilisation remains low at ~ 23%.
Key takeaway: PLNG reported a 10% ebitda beat on trading gains on Spot cargos, with volumes 1% ahead of JEFe. Ebitda beat would have been higher but for reversal of Rs 0.65billion of ‘Use or Pay’ revenues. Mgmt expects to hold vol flat y/y in FY22 despite the high LNG prices. Though volume growth is muted over FY21-24E, earnings visibility is strong with 95% of Dahej volumes pre-contracted. We cut EPS 2% for FY22E and maintain ‘buy’ with an unchanged DCF-based PT of Rs 330.
Dahej volumes resilient: Despite the spike in spot LNG prices, Dahej volumes remained robust with utilisation recovering to ~ 100% (1QFY22: 86%) and coming in-line with estimates.
Kochi volumes flattish q/q: Kochi volumes were flattish q/q in 2QFY22 after volumes had risen in 1QFY22 helped by full impact of pipeline connectivity in early 2021. But utilisation remains low at ~ 23%.
PLNG market share at 4-year high: LNG imports into India were down 9% y/y in 2QFY22 but contracted capacity helped PLNG in limiting the y/y volume decline to 6%. The market share of PLNG thus rose to a 4-year high of 77% during 2QFY22.
Ebitda and PAT 9-10% ahead: Although volumes were largely in-line, ebitda came 10% ahead helped by trading gains on Spot volume (Rs 1.3billion) and inventory gains (Rs 0.3billion). Ebitda beat would have been bigger but for reversal of take-or-pay revenues of Rs 0.65billion as the customer compensated for the shortfall by taking more volume at Kochi instead of Dahej.
Dahej util strong in October, guidance of flat volume y/y in FY22E: Company indicated 16.5mmtpa out of 17.5mmtpa at Dahej is committed with long-term (LT) volume, short-term (ST) volume and regas services over FY22-23E. Dahej util at 96% in October indicates limited impact of prevailing high LNG prices. Management expects to hold volumes flat y/y in FY22E.
Kochi tariff finalisation should be NPV neutral: Management indicated there could be minor downside to Kochi regas tariff that will be compensated by higher volume commitment from off-takers to keep NPV intact for PLNG. The possible lower tariff will result in some revenue reversal for PLNG owing to retrospective impact (applicable from 1-April-19). The tariff is likely to be agreed over 2HFY22E.
Resilient earnings, valuation benign: With 95% of Dahej volume contracted over FY22-23E, PLNG’s earnings visibility is strong. Valuation is more than 1 SD below its last seven-year average, indicating favourable risk/reward. However, volume growth trajectory is muted over FY21-24E until new capacity is commissioned at Dahej. We have modestly cut FY22-24E EPS by ~ 2% as we have lowered volume estimates. Maintain ‘Buy’ with an unchanged Rs 330 PT based on DCF.