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

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Petronet LNG: Volumes drive performance
Apr 27, 2011

Petronet LNG announced the fourth quarter results of financial year 2010-2011 (4QFY11). The company has reported a 67 % YoY and 112 % YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Revenues soared 67.1% YoY during the quarter. For FY11, the topline registered an increase of 23.9% YoY.
  • Operating profit growth surpassed the growth in the topline as company registered a growth of 73.7% YoY for the quarter. For FY11, the growth came at 43.7% YoY.
  • The operating margins improved by 0.3% YoY during the quarter. For FY11, the margins were up by 1.3% YoY.
  • Net profits growth accelerated to 112 % YoY during the quarter. For FY11, the bottomline grew by 53% YoY. Net profit margins were up by 1.1% YoY and 0.9% YoY for the quarter and FY11 respectively.


Financial Performance snap shot
(Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
Sales 23,855 39,860 67.1% 106,491 131,973 23.9%
Expenditure 21,833 36,347 66.5% 98,026 119,810 22.2%
Operating profit (EBIDTA) 2,022 3,513 73.7% 8,465 12,163 43.7%
Operating profit margin (%) 8.5% 8.8%   7.9% 9.2%  
Other income 332 314 -5.5% 978 680 -30.5%
Interest 511 431 -15.6% 1,839 1,931 5.0%
Depreciation 456 455 -0.4% 1,609 1,847 14.8%
Profit before tax 1,386 2,941 112.1% 5,995 9,064 51.2%
Profit before tax margin (%) 5.8% 7.4%   5.6% 6.9%  
Tax 414 878 112.3% 1,950 2,868 47.1%
Profit after tax/(loss) 973 2,063 112.0% 4,045 6,196 53.2%
Net profit margin (%) 4.1% 5.2%   3.8% 4.7%  
No. of shares         750  
Diluted earnings per share (Rs)*         8.3  
P/E ratio (x) *         16.6  
* On a trailing 12 months basis

What has driven performance in 4QFY11?
  • Petronet LNG clocked higher sales in terms of volumes. Volumes were 125.8 trillion British thermal units (tBTU) during the quarter versus 91.8 tBTU in the same period last year (4QFY10). Besides rise in volumes, the top line was also driven by average pricing benefit of 21.9% YoY. For FY11, net sales registered 23.9% YoY growth driven by 9% YoY increase in volumes and 14% YoY improvement in average realizations.

    Cost breakup
    (Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
    Consumption of raw materials 21,413 35,743 66.9% 96,648 118,012 22.1%
    % of sales 89.8% 89.7%   90.8% 89.4%  
    Staff cost 81 122 49.9% 204 306 49.5%
    % of sales 0.3% 0.3%   0.2% 0.2%  
    Other expenditure 339 482 42.2% 1,174 1,493 27.1%
    % of sales 1.4% 1.2%   1.1% 1.1%  
    Total cost 21,833 36,347 66.5% 98,026 119,810 22.2%
    % of sales 91.5% 91.2%   92.1% 90.8%  

  • Operating margins improved marginally by 0.3% YoY due to better cost management during the quarter. The overall operating profits for the quarter were up 73.7% YoY boosted by the increase in top line. Company's EBITDA per million British Thermal Units (mmBTU) rose by 27% YoY for the quarter. For FY11, the margins registered 1.3% YoY growth, due to better raw material cost management. For the year, the overall operating profits were up 43.7% YoY. Company's EBITDA per million British Thermal Units (mmBTU) rose by 32.1% YoY for the FY11.

  • Net profits registered a spectacular growth of 112% YoY during the quarter. The profits were up due to growth in the topline and decrease in interest and depreciation costs, partially offset by decrease in ‘other income'. The net profit margins for the quarter came at 5.2% (versus 4.1% for 4QFY10). For FY11, the net profits were up by 53% YoY. The margins for the year came at 4.7%, up 0.9% YoY.

What to expect?
Petronet's performance has improved on account of increase in demand of imported LNG. Going forward, we expect the company to do better on the back of capacity expansion plan. This is one company that will gain from declining domestic gas supplies.

In terms of valuations, at current price of Rs. 137, the stock is trading at 16.6 times its trailing 12 months EPS. This is close to the industry's PE of 17.2x. The stock prices have risen almost 100% since the level seen in Feb 2010. The stock seems to be fairly valued.

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