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Petronet LNG : Volumes drive performance - Views on News from Equitymaster

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Petronet LNG : Volumes drive performance
Jan 20, 2011

Petronet LNG has announced its 3QFY11 results. The company reported a 61.6% YoY increase in the net revenues and 105.3% YoY growth in net profits. Here is our analysis of the results.

Performance summary
  • Revenues soared 61.6% YoY driven by higher sales volumes. For the 9 months period, revenues were up by 11.5% YoY.
  • Operating margins improved by 0.2% YoY during the quarter. For the 9 months period, the margins rose by 1.6% YoY
  • Net profits surged by 105.3% during the quarter. For the 9 months period, net profits were up by 34.5%YoY. Net profit margins rose by 1.0% YoY. For the 9 months period, the margins were up by 0.8% YoY.


Finacial Performance snap shot
(Rs m) 3QFY10† 3QFY11† Change† 9mFY10† 9mFY11† Change
Sales† 22,446 36,276 61.6% 82,636 92,113 11.5%
Expenditure† 20,358 32,820 61.2% 76,194 83,464 9.5%
Operating profit (EBIDTA)† 2,088 3,456 65.6% 6,443 8,650 34.3%
Operating profit margin (%)† 9.3% 9.5%   7.8% 9.4%  
Other income† 167 54 -67.6% 647 366 -43.4%
Interest† 534 507 -5.1% 1,328 1,500 12.9%
Depreciation† 466 465 -0.2% 1,152 1,392 20.8%
Profit before tax† 1,255 2,538 102.2% 4,609 6,123 32.9%
Tax† 423 830 96.2% 1,537 1,990 29.5%
Profit after tax/(loss)† 832 1,708 105.3% 3,072 4,133 34.5%
Net profit margin (%)† 3.7% 4.7% 1.0% 3.7% 4.5% 0.8%
No. of shares†       750 750  
Diluted earnings per share (Rs)*†         5.5  
P/E ratio (x) *         23.6  
* on a trailing 12 months basis

What has driven performance in 3QFY11?
  • Petronet LNG clocked higher sales in terms of volumes. Volumes were 119.7 trillion British thermal units (tBTU) during the quarter versus 95.24 BTU in the same period last year (3QFY10). The volumes include regasification volumes of 8.6 t BTU versus 10.9 tBTU last year. Besides rise in volumes, the top line was also driven by a pricing benefit of 23.4% YoY and 9.8% YoY for the Petronet Sales and regasification services respectively.

  • Operating margins were stable due to similar cost structure as that of last year. However, the overall operating profits were up 65.6% YoY boosted by the increase in top line. Companyís EBITDA per million British thermal units (mmBTU) rose by 32% YoY.

  • Net profits surged by 105.3% YoY during the quarter driven by the rise in revenues and a 5.1% YoY decline in the interest costs.
Cost breakup
(Rs m) 3QFY 10 3QFY 11 Change 9mFY 10 9mFY 11 Change
Consumption of raw materials† 20,026 32,389 61.7% 75,235 82,269 9.3%
% of sales† 89.2% 89.3%   91.0% 89.3%  
Staff cost† ††41 ††57 38.9% 123 184 49.3%
% of sales† 0.2% 0.2%   0.1% 0.2%  
Other expenditure† 291 374 28.4% 836 1,011 21.0%
% of sales† 1.3% 1.0%   1.0% 1.1%  
Total cost† 20,358 32,820 61.2% 76,194 83,464 9.5%
% of sales† 90.7% 90.5%   92.2% 90.6%  

What we expect?
At the current price of Rs. 130, the stock is trading at 23.6 times its trailing 12 months EPS. Petronetís performance has been boosted by general shortage in gas supply versus the rising demand. Going forward, we expect the company to do better on the back of higher capacity utilization. While the company has shown a good performance during the quarter, it seems to be fairly valued at current levels. Also, we believe the implications of the impending shift in the supply structure of gas in India will be negative for the company, and hence, advise caution on the stock from a medium term perspective.

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