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Petronet LNG: Leveraging on gas demand supply deficit - Views on News from Equitymaster
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  • Apr 26, 2012 - Petronet LNG: Leveraging on gas demand supply deficit

Petronet LNG: Leveraging on gas demand supply deficit
Apr 26, 2012

Petronet LNG has announced results for financial year 2011-2012 (FY12). The company has reported a 72% year on year (YoY) increase in the topline alongwith 70.7% YoY growth in the bottomline for the year.

Performance Summary
  • Revenues soared 59.9% YoY (up 0.7% QoQ) during the quarter. For FY12, the topline was up 72.0% YoY.
  • Operating profits growth slowed down to 20.4% YoY during the quarter (15.9% QoQ decline) with margins at 6.6 % (as compared to 7.9% in the 3QFY12 and 8.8% in 4QFY11). For FY12, the operating profit was up 50.4% YoY, with margins coming at 8.1% (versus 9.2% last year).
  • Net profits for the quarter were up 18.8% YoY (down 17.0% QoQ) with net profit margins at 3.8% versus 5.1% last year and 4.7% in the previous quarter. For FY12, the bottomline registered a whopping increase of 70.7% YoY, with margins coming at 4.6% (versus 4.7% last year).
  • The Board has suggested a dividend of Rs 2.5 per equity share of Rs 10 share subject to approval of the members of the company at the forthcoming annual general meeting.

Standalone performance summary
(Rs m) 4QFY11 4QFY12 Change FY11 FY12 Change
Sales 39,860 63,754 59.9% 131,973 226,959 72.0%
Expenditure 36,257 59,524 64.2% 119,667 208,666 74.4%
Operating profit (EBDITA) 3,603 4,230 17.4% 12,306 18,292 48.6%
EBDITA margin (%) 9.0% 6.6%   9.3% 8.1%  
Other income 228 221 -3.0% 539 849 57.4%
Total revenues 40,088 63,975 59.6% 132,512 227,807 71.9%
Interest (net) 436 342 -21.5% 1,934 1,774 -8.3%
Depreciation 455 458 0.8% 1,847 1,842 -0.3%
Profit before tax 2,941 3,651 24.2% 9,064 15,525 71.3%
Pretax margin (%) 7.3% 5.7%   6.8% 6.8%  
Tax 878 1,200 36.7% 2,868 4,950 72.6%
Profit after tax/(loss) 2,063 2,451 18.8% 6,196 10,575 70.7%
Net profit margin 5.1% 3.8%   4.7% 4.6%  
No. of shares (m)         750  
Diluted earnings per share (Rs)*         14.1  
Price to earnings ratio (x)**         10.3  
*On a trailing 12 months basis

What has driven performance in FY12?
  • During the quarter, the growth in sales came at 60%, backed by higher volumes and better prices. During the quarter, the company imported and regasified 135 Trillion British Thermal units (TBtus) versus 126 TBtus in 4QFY11. For FY12, the growth in sales was 72% YoY. The company’s Dahej terminal operated at 107% of the capacity and processed 548 TBtus, up 25% YoY.

  • The operating profits of the company were up 20.4% YoY for the quarter and the margins declined to 6.6% from 8.8% last year (YoY ). The margins declined as raw material cost (as a % of sales) went up from 89.7% of sales in 4QFY11 to 93.2% in the current quarter. Similarly , for full year , the raw material costs increased to 90.7% (as a % of sales) versus 89.4% last year. For FY12, net profits registered a growth of 70.7% on account of strong growth in topline and 25% growth in ‘Other income’. The bottomline also got support from 8% YoY decline in finance charges.

    Cost breakup
    Rs million 4QFY11 4QFY12 Change FY11 FY12 Change
    Raw materials 35,743 59,393 66.2% 118,012 205,867 74.4%
    as a % of sales 89.7% 93.2%   89.4% 90.7%  
    Staff Cost 122 108 -11.6% 305.6 297.6 -2.6%
    as a % of sales 0.3% 0.2%   0.2% 0.1%  
    Other expenditure 477 599 25.4% 1,494 2,122 42.0%
    as a % of sales 1.2% 0.9%   1.1% 0.9%  
    Forex fluctuations -86 -575   -145 380  
    Total expenditure 36,257 59,524 64.2% 119,667 208,666 74.4%
    as a % of sales 91.0% 93.4%   90.7% 91.9%  

What to expect?
The management has guided for a capex of Rs 15 bn for FY13, mainly for Kochi terminal which will have a capacity of 5 million tonnes. The company also plans to expand Dahej terminal. Kochi terminal is expected to be open for operations from December 2012. Initially, the company expects volumes to be subdued (1.5 million tonnes per annum). As per the management, the company will be able to maintain volumes at 10.5 to 10.7 million tonnes per annum (MTPA) in the near term. The company seems to be really bullish on demand of imported gas as domestic gas supplies are expected to fall further. Hence, it has plans to add another port at east coast of India.

As per the management, the company’s marketing margins should not be regulated by Petroleum and Natural Gas Regulatory Board (PNGRB) as it deals with imported gas and hardly sells any gas directly to end users.

At the current price of Rs 139, the stock is trading at a trailing twelve months multiple of 9.9x. Considering the huge demand of gas and company’s strong fundamentals, we believe that the stock has a sufficient upside .

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