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Petronet LNG : Higher volumes boost bottomline - Views on News from Equitymaster

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Petronet LNG : Higher volumes boost bottomline
Jul 21, 2011

Petronet LNG (PLNG) announced the results for the first quarter of financial year 2011-2012 (1QFY12). The company has reported a whopping 83% year on year (YoY) and 131% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Revenues soared 83% YoY during the quarter.
  • Operating profit growth registered a growth of 77% YoY. The margins were down 0.3% YoY
  • Net profits growth accelerated to 131% YoY during the quarter. The net profit margin also registered a growth of 1.1% YoY.


Financial Performance snap shot
(Rs m) 1QFY11 1QFY12 Change
Sales 25,260 46,233 83.0%
Expenditure 22,782 41,852 83.7%
Operating profit (EBIDTA) 2,477 4,381 76.9%
Operating profit margin (%) 9.8% 9.5%  
Other income 126 263 108.5%
Interest 498 464 -6.9%
Depreciation 461 458 -0.7%
Profit before tax 1644 3722 126.4%
Profit before tax margin (%) 6.5% 8.1%  
Tax 530 1,155 117.9%
Profit after tax/(loss) 1,114 2,567 130.5%
Net profit margin (%) 4.4% 5.6%  
No. of shares   252  
Diluted earnings per share (Rs)*   10.20  
P/E ratio (x) *   16.1  
* On a trailing 12 months basis

What has driven performance in 1QFY12?
  • Petronet LNG reported net sales at Rs 46.2 bn, recording an impressive 83% growth in the top line on account of increase in volumes and steadily growing capacity utilization transfer at Dahej plant. The company achieved a capacity utilization of a little more than 10 million tonne, which is also the nameplate capacity. In terms of volume, it achieved 133 trillion BTUs (British Thermal Units) this quarter, up 6% with respect to the previous quarter, which itself was very good. Out of the total, 64% cargoes were long term contracts. The regasification revenues also registered an increase of 5% as compared to the previous year. The increase in revenues was further supported by margins on spot cargoes.

  • The operating profits for the quarter registered a year on year growth of 77%. However, the margins declined a bit by 0.3% YoY. The decline in the margins was despite a decline in staff costs and other expenses (as a percentage of sales) and this was more than offset by 1% increase (as a % of sales) in raw material costs.

    Cost breakup
    (Rs m) 1QFY11 1QFY12 Change
    Consumption of raw materials 22,333 41,331 85.1%
    % of sales 88.4% 89.4%  
    Staff cost 73 64.1 -12.7%
    % of sales 0.3% 0.1%  
    Other expenditure 376 457 21.5%
    % of sales 1.5% 1.0%  
    Total cost 22,782 41,852 83.7%
    % of sales 90.2% 90.5%  

  • The net profits for the quarter came at Rs 2.6 bn, registering a YoY growth of 131%. The margins were up by 1.1% YoY. Besides a strong performance at the topline level, the margins were supported by decline in interest costs (down 7% YoY) and a decline in depreciation charges (down 1% YoY)

What to expect?
As per the company management, the company board has received approval for its capacity expansion plans at Dahej terminal. It is targeting expansion to 15 million tonne versus a current capacity of 10 million tonne. Since the Dahej terminal is almost reaching full capacity utilization and Kochi terminal will take some more time to come on stream, the news will douse concerns regarding further scope of growth in the volumes. As the domestic gas supplies are on a decline, the demand for LNG is expected to remain high which is a strong positive for the company. The company expects a further improvement in regasification charges.

With regards to price performance, the stock was up 3% on account of robust results. The stock price has surged more than 42% in the last five months versus a gain in sensex of 5%. The stock is currently trading at a price to earnings multiple of 16.1 which seems reasonable considering the consistent growth and future prospects of the company, especially in wake of decreasing domestic supplies, rising demand and capacity expansion plans of the company. We have a positive view on the company.

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