PLNG’s Q1FY20 net of Rs 5.6 bn was 7% below JEFe, hurt by AS-116 (Rs 0.52 bn), weak trading and higher opex. Volumes were well ahead, though, with 4.21mt at Dahej and imports in July trending even higher, boding well for the near term. Indeed, even with AS-116, we expect EPS to rise at a 12% CAGR in FY19-22e, together with solid FCF and return ratios. With valuations undemanding, too, at 15.1x FY20e P/E, and scope for higher payouts, we keep our Buy and Rs 315 PT.
Soft: PLNG’s Q1FY20 net profit fell 5% y-o-y to Rs 5.6 bn (Rs 3.7/sh). Core Ebitda was 5% ahead (+15% q-o-q) even with higher opex, though weak trading (likely losses), the impact of AS-116 from its leased LNG ships, and soft other income were drags.
Volume: Imports at Dahej were near their all-time highs of 4.2mt (+3% y-o-y, +10% y-o-y) . Kochi ran at 14% utilisation as supplies to FACT restarted.
Near term: Indeed, LNG imports in India are holding up well, rising +5.9% y-o-y in Q1FY20 as per the ministry, with imports at Dahej trending even higher in July than Q1FY20 run-rates at 1.6mt (per GMB), boding well for the near term.
Upside?: We raise our FY20e Dahej volume estimate by 3% to 16.5mt, noting upside risk if PLNG is able to run the terminal at its full 17.5mt capacity for the rest of the year, as it is targeting, or the KKBM-II pipeline at Kochi (slated for Sep) boosts volumes there.
Outlook: Even so, momentum could slow in medium term as India’s LNG macro turns more challenging as lower-cost domestic production rises and Mundra and Jaigarh terminals start up this year. Yet PLNG’s take-or-pay contracts, low tariffs, and robust connectivity make it best-positioned to navigate this softer macro.
Growth: Thus, we forecast ~12% EPS CAGR in FY19-22e, even with AS-116 (which cuts earnings by ~Rs 0.5-0.9/sh in FY20-22e but boosts them in the long term) and solid FCF even after the Rs 25 bn spend on two more tanks and a third jetty at Dahej to raise effective capacity.
Buy: Indeed, FCFE may aggregate ~Rs 100/sh (~40% of m-cap) over five years, leaving scope for higher dividends, too, especially as PLNG is still careful in evaluating projects.