Petronet LNG reported PAT at R1.8 billion up 10% y-o-y and down 28% q-o-q, impacted by ship idling cost of Rs 850 million due to lower offtake of long term volumes. Dahej utilisation at 108% for 3QFY16, with total volumes of 138 tbtu declining 2/10% y-o-y/q-o-q respectively, driven by a 60% y-o-y decline in long term volumes, offset by 118% y-o-y higher spot/tolling volumes. Overall gross margins of Rs 16.7/mmbtu, down 48% y-o-y, and 52% q-o-q driven by costs impact from lower utilisation of time charter ships.
EBITDA margins of Rs22.8/mmbtu, down 6% y-o-y, 25% q-o-q (est of R28.7/mmbtu). Despite sharp drop in long term volumes, utilisation remains above 108%. Successful renegotiation of long-term contract with Qatar with additional 1 mt volume. Though margins declined due to ship idling costs. We raise FY16/17/18 estimates by 13/23/7% respectively to factor in better volume prospects. TP raised to Rs 350.
Post a tepid FY14-16E, we estimate Petronet LNG is set to see a significant improvement in operational and financial metrics over the next 2 years. Revised pricing formula for long-term cargoes from RasGas and sustained decline in short term LNG prices is set to dramatically improve affordability of LNG in the country. Thus, utilisation levels for Dahej terminal will continue to improve over FY16-18E.
We estimate 38% CAGR in EPS over FY16-18E to `21.5/share. At CMP, the stock trades at attractive multiples of 11.7 FY18E EPS and 6.9x EV/E.
Our revised TP of `350/share implies 39% upside from here.