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Petronet LNG: Forex gains boost bottomline - Views on News from Equitymaster
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Petronet LNG: Forex gains boost bottomline
Oct 23, 2012

Petronet LNG has announced results for second quarter of the financial year 2011-2012 (FY12). The company has reported a 41% year on year (YoY) increase in the topline along with 21% YoY growth in the bottomline for the quarter.

Performance summary
  • Revenues soared 40.7% YoY during the quarter. For the first half, sales were up 45.9% YoY.
  • Operating profits were up 15.6% YoY during the quarter (with margins at 6.9% as compared to 8.4% in the 2QFY12). For half year, the operating profits were up 9.7% YoY. The operating margins for the first half year stood at 6.7% versus 8.9% in 1HFY12.
  • Net profits for the quarter were up 20.9% YoY with net profit margins at 4.2% versus 4.8% last year .For the first half year, the bottomline was up 13.3% YoY and net profit margins stood at 4.0% as compared to 5.2% in 1HFY12.

Standalone performance summary
(Rs m)  2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
Sales  53,669 75,486 40.7% 99,902 145,790 45.9%
Expenditure  49,185 70,302 42.9% 91,005 136,035 49.5%
Operating profit (EBDITA)  4,484 5,184 15.6% 8,896 9,755 9.7%
EBDITA margin (%)  8.4% 6.9%   8.9% 6.7%  
Other income  201 248 23.2% 432 514 18.9%
Total revenues  53,870 75,734 40.6% 100,334 146,304 45.8%
Interest (net)  458 317 -30.9% 922 646 -30.0%
Depreciation  463 467.3 0.9% 920.9 926.6 0.6%
Profit before tax  3,763 4,648 23.5% 7,485 8,696 16.2%
Pretax margin (%)  7.0% 6.1%   7.5% 5.9%  
Tax  1,160 1,500 29.3% 2,315 2,840 22.7%
Profit after tax/(loss)  2,603 3,148 20.9% 5,170 5,856 13.3%
Net profit margin  4.8% 4.2%   5.2% 4.0%  
No. of shares (m)          750  
Diluted earnings per share (Rs)*          15.0  
Price to earnings ratio (x)**          11.0  
*On the basis of trailing 12 months earnings

What has driven performance in 2QFY13?
  • The company reported a 41% YoY growth in revenues during the quarter. The gas sales volumes during the quarter stood at 135 trillion British thermal units (tBtus), up 6% quarter on quarter (QoQ). The company achieved 106% of capacity utilization during the quarter. The company's trading margins improved during the quarter. The gas sales volumes during the quarter improved on account of better demand as spot prices of LNG softened.

  • The operating profits were up by 15.6% YoY during the quarter. Sequentially, the margins improved from 6.5% in the previous quarter to 6.9% in the current quarter. This was due to higher margins on gas sales and better volumes. As per the management, the operational efficiencies also improved during the quarter.

  • The net profits for the quarter registered 20.9% YoY growth with margins at 4.2% as compared to 4.8% in 2QFY12. The net profits were higher as cost of gas came down due to the exchange rate movement (expenses were down by Rs 1.1 bn during the quarter as compared to an increase in expenses by Rs 0.5 bn in 2QFY12). The interest costs also were down by 31% YoY.

What to expect?
The demand for gas in the country is huge and falling domestic supplies and limited capacity of LNG terminals offers a very strong growth potential for companies involved in importing gas. Petronet is already functioning above 100% of its capacity. It 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 first quarter of calendar year 2013. The Dahej expansion project is also going on as per the plan. Once these capacities become operational, we believe Petronet will be the best placed companies playing on gas demand supply gap.

The stock is currently trading at a PE of 11 times its trailing 12 months earnings. Our target price of Rs 240 (at the end of FY15) offers 17% of average returns from a 3 year perspective. We suggest our investors to Buy the stock.

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