19 October 2015
2QFY16 Results Update | Sector:
Oil & Gas
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Free float (%)
222 / 160
TP: INR194 (2%)
M.Cap. (INR b) / (USD b) 143.3/2.2
Avg Val (INR M)/Vol ‘000 226/1198
Financials & Valuation (INR Billion)
EPS Gr. %
2015 2016E 2017E
D. Yield (%)
Above estimate, led by higher Dahej volumes; RasGas long-term offtake remains at
PLNG reported 2QFY16 EBITDA at INR4.7b (est. INR4.2b; -10% YoY, +29% QoQ).
EBITDA beat was led by higher volumes (boosted by higher third-party regas
volumes). We estimate spot marketing margin at nil v/s USD-0.1/mmbtu in
1QFY16. PAT stood at INR2.5b (est. INR2.2b; -5%YoY, +42% QoQ)—further boosted
by lower depreciation and interest charge, and partly negated by higher tax rate.
Dahej utilization at ~120% in 2QFY16, boosted by power sector offtake
Dahej regas volumes at 154tbtu (+3% YoY, +23% QoQ) were helped by huge
increase in third-party volumes at 72tbtu (+133% YoY, +104% QoQ) and could have
been led by power sector. While short-term remained volatile with volumes at
19tbtu (-23% YoY, -18% QoQ), long-term volume offtake was capped at ~68%—at
63tbtu (-33% YoY, -6% QoQ).
With no reloading revenue, Kochi EBITDA turned red and PLNG expects volume
growth from BPCL refinery in the near term and post the pipeline completion in
the medium term.
RasGas offtake clarity contingent on negotiations
RasGas offtake volumes stood at 68% utilization in 9MCY15. PLNG has take-or-pay
contracts with the RasGas volume offtakers and has indicated that the obligation,
if any, would be determined toward end-CY15.
RasGas offtakers are trying to renegotiate the contract because consumers are not
offtaking this gas as spot LNG is much cheaper. Early resolution of the issue is
critical for smooth operations at Dahej. Given the likely ample LNG supply globally
and India being a big customer for RasGas, we expect early resolution of the issue.
Valuation and view
The stock trades at 14.5x FY17E EPS of INR13.2. FY18E earnings show a sharp jump
(+35% YoY) based on PLNG’s long-term volumes. However, clarity on RasGas
contract enforceability and Kochi pipeline completion is critical. Maintain
with a price target of INR194/sh as we believe the current valuations adequately
factor near-medium term growth.
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
(Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558
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