Petronet LNG’s (PLNG) 4QFY2011 net sales increased by 65.6% yoy to `3,941cr on the back of higher volumes and improved realisation. Net profit increased by 112.0% yoy to `206cr. We remain Neutral on the stock.
Robust volume growth and price increases drive sales growth: PLNG’s R-LNG volumes increased by 37.1% yoy to 125.8TBTU mainly on account of increased spot and tolling volumes. Tolling volumes during the quarter stood at 13.6TBTU compared to 1.0TBTU in 4QFY2010. Contractual volumes increased to 99.0TBTUs as against 91.0TBTUs in 4QFY2010. Thus, the company’s net sales increased 65.6% yoy to `3,941cr.
Strong growth in EBITDA and net profit: EBITDA margin expanded by 42bp yoy to 8.9% in 4QFY2011, resulting in EBITDA/mmbtu of `27.9 (`22.3) mainly on account of an increase in sales volumes and realisation. EBITDA registered a 73.7% yoy increase to `351cr. Net profit increased by 112.0% yoy to `206cr, representing net margin of 5.2% in 4QFY2011 (4.1% in 4QFY2010).
Outlook and valuation: For 4QFY2011, PLNG reported robust revenue and profit growth; however, the company’s capacity utilisation almost peaked, indicating further upside on volumes remains capped. Further, spot LNG prices have increased by ~20% since January 2011, which should keep PLNG’s margin growth muted in the near term. Although the company is expanding its capacity, we believe it is too early to discount the increase in earnings from these expansions. We value the stock at a PE multiple of 12.0x and derive a fair price of `139. We continue to maintain our Neutral recommendation on the stock.
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