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Petronet LNG: Decent performance despite volume decline - Views on News from Equitymaster

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  • Aug 2, 2012 - Petronet LNG: Decent performance despite volume decline

Petronet LNG: Decent performance despite volume decline
Aug 2, 2012

Petronet LNG (PLNG) has announced results for financial year 2011-2012 (FY12). The company has reported a 52% year on year (YoY) increase in the topline along with 5.5% YoY growth in the bottomline for the year.

Performance summary
  • Revenues soared 52.1% YoY (up 10.3% quarter on quarter/ QoQ) during the quarter.
  • Operating profits growth came at 3.6% YoY during the quarter (8.1% QoQ growth) with margins at 6.5% (marginally down from 6.6% in 4QFY12) as compared to 9.5% in the 1QFY12.
  • Net profits for the quarter were up 5.5% YoY (up 10.5% QoQ) with net profit margins at 3.9% versus 5.6% last year and 3.8 % in the previous quarter.

Standalone performance summary
(Rs m) 1QFY12 1QFY13 Change
Sales 46,233 70,304 52.1%
Expenditure 41,822 65,733 57.2%
Operating profit (EBDITA) 4,411 4,571 3.6%
EBDITA margin (%) 9.5% 6.5%  
Other income 231 266 15.2%
Total revenues 46,464 70,570 51.9%
Interest (net) 462 329 -28.8%
Depreciation 458 459 0.3%
Profit before tax 3,722 4,049 8.8%
Pretax margin (%) 8.1% 5.8%  
Tax 1,155 1,340 16.0%
Profit after tax/(loss) 2,567 2,709 5.5%
Net profit margin 5.6% 3.9%  
No. of shares (m)   750  
Diluted earnings per share (Rs)*   14.3  
Price to earnings ratio (x)**   10.1  
*On a trailing 12 months basis

What has driven performance in FY12?
  • The company reported a 52% YoY growth in revenues despite a decline in the volumes of gas sold. The gas sales volumes during the quarter stood at 127.17 trillion British thermal units (tBtus) as compared to 133 tBtu in 1QFY12 and 135 tBtus in 4QFY12. The sales volumes declined due to a simultaneous maintenance shutdown in five fertilizer plants in the month of April.

  • The operating profits were up by 3.6% YoY during the quarter with margins at 6.5% versus 9.5% in 1QFY12 on account of better operational efficiencies. There were not significant gains on marketing margins front. The cost of raw materials (as a % of sales) increased to 91.5% as compared to 89.4% in 1QFY12 and the margins declined.

    Rs m 1QFY12 1QFY13 Change
    Raw materials 41,331 64,328 55.6%
    as a % of sales 89.4% 91.5%  
    Staff Cost 64.1 70.7 10.3%
    as a % of sales 0.1% 0.1%  
    Other expenditure 459 637 38.9%
    as a % of sales 1.0% 0.9%  
    Forex fluctuations -31.5 697 -2312.7%
    Total expenditure 41,822 65,733 57.2%
    as a % of sales 90.5% 93.5%  

  • The net profits for the quarter registered 5.5% YoY growth with margins at 3.9% as compared to 5.6% in 1QFY12. The company saved Rs 20 m by not paying on a time charter on one of the ships. The growth in the bottomline was better than operating profit growth as interest costs were down 28% YoY.

What to expect?
Despite a wide scale shutdown for month, Dahej terminal operated at full capacity. For the coming quarters, we expect the volumes to be better. As per the management, the gas prices have softened down (US$ 11per mmbtu) which should encourage its use for power plants.

The demand for gas in the country is huge and limited capacity of LNG terminals offers a very strong growth potential for companies involved in importing gas. Petronet has made good progress in capacity expansion plans to realize this potential. As per the management, Kochi terminal is expected to open for operations from December 2012. Besides, the company is planning to invest in second jetty (at an estimated capex of Rs 10 bn) that should improve the volumes.

The stock is currently trading at a PE of 10 times its trailing 12 months earnings. Our target price of Rs 240 offers 21% of average returns from a 3 year perspective. We suggest our investors to Buy the stock.

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