BUY CMP 200.85 Target Price 225.00 PETRONET LNG LIMITED Result Update (PARENT BASIS): Q2 FY15 DECEMBER 20 th 2014 ISIN: INE347G01014 Index Details Stock Data Sector Oil & Gas BSE Code 532522 Face Value 10.00 52wk. High / Low (Rs.) 208.70/102.50 Volume (2wk. Avg.) 138000 Market Cap (Rs. in mn.) 150637.50 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 377475.80 449951.15 528242.65 EBITDA 15822.00 19218.83 21482.95 Net Profit 7119.20 8020.94 8936.45 EPS 9.49 10.69 11.92 P/E 21.16 18.78 16.86 Shareholding Pattern (%) 1 Year Comparative Graph PETRONET LNG LTD S&P BSE SENSEX Highlights Petronet LNG Ltd is one of the fastest growing worldclass companies in Indian energy sector formed as a Joint Venture by the Government of India to import LNG and set up LNG terminals in the country. In Q2 FY15, Net profit jumps to Rs. 2628.10 million an increase of 44.60% against Rs. 1817.50 million in the corresponding quarter of previous year. Net sales grew by 15.66% y-o-y in Q2 FY15 and stood at Rs. 94934.70 million compared to Rs. 1865.32 million in Q2 FY14. During the quarter, operating profit rose by 45.79% y- o-y of Rs. 5540.80 million as against Rs. 3800.60 million in the corresponding period of the previous year. Total Income has increased from Rs. 95096.10 million for the quarter ended Sept 30, 2013 to Rs. 110150.10 million for the quarter ended Sept 30, 2014. During the quarter ended 30th Sept, 2014, Company s Dahej terminal has operated at highest level ever of around 117 % of its name plate capacity. The work for expansion of Dahej LNG terminal from 10 MMTPA to 15 MMTPA is going on as per schedule and it is expected that this capacity expansion will be completed by end of the year 2016. The Government of Andhra Pradesh has accorded approval for setting up the LNG Project of 5 MMTPA at Gangavaram. Net Sales of the company is expected to grow at a CAGR of 19% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Petro net LNG Ltd 200.85 150637.50 9.49 21.16 3.02 20.00 Indian Oil Corporation Ltd 334.75 812757.10 41.40 8.09 1.23 50.00 Castrol India Ltd 506.45 250470.50 9.48 53.42 49.70 70.00 Gulf Oil Corporation Ltd 152.65 7567.20 11.02 13.85 0.67 125.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY15, Petronet LNG Ltd, one of the fastest growing worldclass companies in Indian energy sector in India, reported its financial results for the quarter ended 30 th Sep, 2014. Rs. In Mn Sep-14 Sep-13 % Change Net Sales 109799.60 94934.70 15.66 PAT 2628.10 1817.50 44.60 EPS 3.50 2.42 44.60 PBIDT 5540.80 3800.60 45.79 The company s net profit Jumps to Rs. 2628.10 million against Rs. 1817.50 million in the corresponding quarter previous year, an increase of 44.60%. This is despite the additional charge of depreciation and interest cost on account of Kochi LNG terminaland second jetty at Dahej. The reason for a sharp increase in profit is an overall increase in volumes and higher trading margins at Dahej for spot / short-term volumes. Revenue for the quarter rose by 15.66% to Rs. 109799.60 million from Rs. 94934.70 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 3.50 a share during the quarter, registering 44.60% increase over previous year period. Profit before interest, depreciation and tax is Rs. 5540.80 million as against Rs. 3800.60 million in the corresponding period of the previous year. Break Up of Expenditure Rs. In Million Q2 FY15 Q2 FY14 CHNG % Other Expenditure 1013.90 869.40 17% Employee Benefit Expenses 109.90 79.90 38% Depreciation & Amortization Expense 773.50 596.70 30% Cost of Material Consumed 103485.50 90346.20 15%
COMPANY PROFILE The company incorporated on April 2, 1998 and commencement of commercial operations from April, 2004. Petronet LNG Limited engages in the import, regasification, and supply of liquefied natural gas (LNG) in India. The company owns and operates LNG regasification terminal with the name plate capacity of 10 MMTPA at Dahej in the state of Gujarat. It supplies LNG primarily to Bharat Petroleum Corporation Limited, GAIL (India) Limited, and Indian Oil Corporation Limited. Petronet LNG is also drawing keen interest from global energy industry stars. While French national gas company Gaz de France (GDF) is the strategic partner, Ras Laffan Liquefied Natural Gas Company Limited, Qatar, has signed an LNG sale and purchase agreement (SPA) with the company for the supply of LNG to India. LNG supply contract with Ras Gas, Qatar & Exxon Mobil, Australia Gas Sales Agreement with GAIL, IOCL & BPCL back to back with SPA Time Charter Agreement with established consortium Entire Fuel cost pass through including exchange rate. LNG Terminals Dahej LNG Terminal The Company has set up South East Asia's first LNG Receiving and Regasification Terminal with an original nameplate capacity of 5 MMTPA at Dahej, Gujarat. The capacity of the terminal has been expanded to 10 MMTPA and the same has been commissioned in June, 2009. The expansion involved construction of 2 additional LNG storage tanks and other vaporization facilities. The terminal is meeting around 20% of the total gas demand of the country. Kochi LNG Terminal The company has completed another 5 MMTPA Greenfield LNG import and re-gasification plant in Kochi in Kerala. It was dedicated to the Nation by Hon ble Prime Minister on 4th January, 2014. This will enable PLL to expand reach and supply natural gas in the south. In addition, PLL has decided to construct another LNG Terminal on the East Coast of India at Gangavaram, near Vishakhapatnam in Andhra Pradesh. The terminal at Kochi will help in meeting enormous demand of natural gas for Power, Fertilizers, Petrochemicals and various other industries in the Southern States. New Third Terminal at East Coast Proposed Capacity: 5 Mmtpa
Location: Gangavaram, Andhra Prades Regasification Scheme: Indirect Fluid using ambient air heater. Progress on Schedule Regasification Scheme: Indirect fluid using ambient air Heater PFR Completed DFR under Preparation Promoters of the Company GAIL (India) Limited (GAIL), Oil & Natural Gas Corporation Limited (ONGC), Indian Oil Corporation Limited (IOCL) Bharat Petroleum Corporation Limited.
FINANCIAL HIGHLIGHTS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31 st, 2013-2016E PETRONET LNG LIMITED FY13A FY14A FY15E FY16E SOURCES OF FUNDS Shareholder's Funds Share Capital 7500.00 7500.00 7500.00 7500.00 Reserves and Surplus 36996.90 42361.20 50382.14 59318.59 1. Sub Total - Net worth 44496.90 49861.20 57882.14 66818.59 Non Current Liabilities Long term borrowings 27182.20 26477.40 24359.21 23141.25 Deferred Tax Liabilities 3910.00 5530.00 7078.40 8494.08 Other Long Term Liabilities 0.00 3000.00 5940.00 7425.00 Long Term Provisions 33.70 38.00 45.60 52.44 2. Sub Total - Non Current Liabilities 31125.90 35045.40 37423.21 39112.77 Current Liabilities Short Term Borrowings 0.00 2487.20 2462.33 2413.08 Trade Payables 22973.50 18868.40 21698.66 23434.55 Other Current Liabilities 9966.20 10173.90 13022.59 14455.08 Short Term Provisions 2265.70 2690.70 0.00 0.00 3. Sub Total - Current Liabilities 35205.40 34220.20 37183.58 40302.71 Total Liabilities (1+2+3) 110828.20 119126.80 132488.93 146234.07 APPLICATION OF FUNDS Non-Current Assets Fixed Assets i. Tangible Assets 23519.80 62612.70 73191.14 80510.25 ii. Intangible Assets 59.00 37.70 24.51 16.42 iii. Capital Work-in-Progress 43305.10 8799.30 2199.83 659.95 a) Total Fixed Assets 66883.90 71449.70 75415.47 81186.62 b) Non-Current Investment 1398.80 900.00 927.00 973.35 c) Long Term loans and advances 1173.00 2520.00 3578.40 4007.81 1. Sub Total - Non Current Assets 69455.70 74869.70 79920.87 86167.78 Current Assets Current Investment 0.00 498.80 3870.69 5728.62 Inventories 10366.30 9556.90 9795.82 10383.57 Trade receivables 16898.00 20156.70 23381.77 27001.44 Cash and Bank Balances 12685.30 12327.30 12623.16 13254.31 Short-terms loans & advances 1396.70 1577.60 1694.34 1846.83 Other current assets 26.20 139.80 1202.28 1851.51 2. Sub Total - Current Assets 41372.50 44257.10 52568.06 60066.29 Total Assets (1+2) 110828.20 119126.80 132488.93 146234.07
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 314674.40 377475.80 449951.15 528242.65 Other Income 865.40 837.50 1490.75 1937.98 Total Income 315539.80 378313.30 451441.90 530180.63 Expenditure -295286.90-362491.30-432223.08-508697.68 Operating Profit 20252.90 15822.00 19218.83 21482.95 Interest -1184.10-2195.80-3513.28-4040.27 Gross profit 19068.80 13626.20 15705.55 17442.68 Depreciation -1866.00-3081.00-3805.04-4242.61 Profit Before Tax 17202.80 10545.20 11900.51 13200.07 Tax -5710.00-3426.00-3879.57-4263.62 Net Profit 11492.80 7119.20 8020.94 8936.45 Equity capital 7500.00 7500.00 7500.00 7500.00 Reserves 36996.90 42361.20 50382.14 59318.59 Face value 10.00 10.00 10.00 10.00 EPS 15.32 9.49 10.69 11.92 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2014 to 31 st Dec, 2014E Value(Rs.in.mn) 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14E Description 3m 3m 3m 3m Net sales 104277.90 101608.20 109799.60 111556.39 Other income 307.60 353.20 350.50 392.56 Total Income 104585.50 101961.40 110150.10 111948.95 Expenditure -100410.00-98030.50-104609.30-107094.14 Operating profit 4175.50 3930.90 5540.80 4854.82 Interest -786.30-784.20-799.20-1022.98 Gross profit 3389.20 3146.70 4741.60 3831.84 Depreciation -1000.20-770.70-773.50-1113.84 Profit Before Tax 2389.00 2376.00 3968.10 2718.00 Tax -696.00-810.00-1340.00-872.48 Net Profit 1693.00 1566.00 2628.10 1845.52 Equity capital 7500.00 7500.00 7500.00 7500.00 Face value 10.00 10.00 10.00 10.00 EPS 2.26 2.09 3.50 2.46
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 15.32 9.49 10.69 11.92 EBITDA Margin (%) 6.44 4.19 4.27 4.07 PBT Margin (%) 5.47 2.79 2.64 2.50 PAT Margin (%) 3.65 1.89 1.78 1.69 P/E Ratio (x) 13.11 21.16 18.78 16.86 ROE (%) 25.83 14.28 13.86 13.37 ROCE (%) 30.86 23.98 27.18 27.85 Debt Equity Ratio 0.61 0.58 0.46 0.38 EV/EBITDA (x) 8.15 10.57 8.58 7.58 Book Value (Rs.) 59.33 66.48 77.18 89.09 P/BV 3.39 3.02 2.60 2.25 Charts
INDUSTRY OVERVIEW On a global scale currently, natural gas constitutes close to an average of 24% of the primary energy consumption. However, in developing markets, namely, India and China the natural gas consumption is 9% and 5% respectively. This is a small percentage of their total primary energy consumption. As per forecast for the future, the main demand centers driving growth in natural gas will be these emerging economies. Due to their large growing population and relatively low per capita energy consumption, as compared to the industrialized world, an increased supply of energy will be required to support improving standards of living. As demand for energy grows, natural gas will play an increasingly important role in the worldwide energy mix because it is not only clean energy, but is also cost effective in the long run as compared to oil. In 2013, LNG production was at 242 MMT, a slight increase from the previous year. This represents about 85% nameplate capacity utilization in the LNG industry. Global LNG Demand: 2013 In 2013, 10 new regas terminals were commissioned, of which, there are three in China and two in India. Three new LNG importers entered the market in 2013, Israel, Singapore and Malaysia. Region wise increase On the demand side, the growth in Japan s demand for LNG now has now stabilized with the country importing 87.5 MMT, almost the same as last year. Japan has reached it capacity limit with regard to total LNG it can import and consume, based on the number of gas power plants and existing LNG storage capacity. In South Korea, there was a power shortage that stemmed from safety issues at some of their nuclear power plants. The closure of the plants led to power shortage and the country required additional imports of LNG. In
2013, Korea imported about 40 MMT of LNG, 10% higher than the previous year. This year, 3 new regas terminals were commissioned in China. As a result, China also increased its imports of LNG by 20% to about 18 MMT. Global Outlook: 2014 In 2013, growth in LNG production was flat, as a consequence, so was LNG trade. 2014 is projected to remain the same, as scanty new supply is due to be commissioned. Post 2014, LNG trade will experience healthy growth. There is a wave of new supply expected from multiple projects, mainly in Australia. Around 60 MMTPA of new capacity is currently under construction or commissioning in Australia, with an additional 7 MMTPA from Papua New Guinea LNG Scenario in India The macro economic scenario in India is a challenge for the domestic energy industry. The GDP growth rate for 2013/14 is estimated at 4.8%. The GDP growth for 2014/15 is forecasted to rise above 6% and reach 7% by 2016. Therefore, despite the current slowdown, the medium and long-term trajectory for the Indian economy seems to be positive. According to the International Energy Agency s World Energy Outlook, it has been forecasted that India s economy will achieve a GDP average real growth rate of 6.4% by 2035. This will surpass China s growth in the same time period. As a consequence, the primary energy consumption of India will grow the fastest as compared to the rest of the world. The growth in demand for natural gas is estimated to be 5.4% as compared to that for oil at 3.6%. These projections show that gas is expected to play a major role in India s energy basket in the future. OUTLOOK AND CONCLUSION At the current market price of Rs.200.85, the stock P/E ratio is at 18.78 x FY15E and 16.86 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.10.69 and Rs.11.92 respectively. Net Sales of the company is expected to grow at a CAGR of 19% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 8.58 x for FY15E and 7.58 x for FY16E. Price to Book Value of the stock is expected to be at 2.60 x and 2.25x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs.225.00 for Medium to Long term investment.
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