Petronet LNG’s March quarter results reflected a pronounced stagnation, as the net profit was flat at Rs 245.1 crore compared with the year-ago period despite a 33% jump in revenues at Rs 8,465.6 crore. The scrip has lost over 20% in three months and the valuations are attractive, but the company needs to decisively overcome its stagnation woes to attract investor fancy. Rise in raw material costs wiped out all the gains from increased revenues. The volumes remained stagnant at 122 trillion British thermal units (TBTUs), as high prices discouraged spot purchases.
The company’s new five-million-tonne-perannum LNG import terminal at Kochi is likely to remain under-utilised in FY14 as the long distance pipeline connecting the terminal to potential buyers is not ready. The company had earlier planned to commission the plant in December 2012, but it now has postponed the commissioning to June. The terminal won’t generate much revenues initially, but the company will have to book depreciation and interest costs towards the $840-million investment, impacting the profitability.
The company has many plans to grow in the medium to long-term. A new berth at Dahej will enable handling of more vessels at the terminal. Power generation plants are being planned near Dahej and Kochi terminals, while a greenfield unit is being planned in Andhra Pradesh. The company has also signed supply contracts with various LNG producers to ensure steady flows. The company’s utility business with stable regassification charges and long-term contracts with low regulatory risks make it an attractive investment at the current price-to-earnings ratio of 9.1. Nevertheless, investors are unlikely to favour the scrip until the company is able to sail through its stagnant phase over the next 2-3 quarters.
The company’s new five-million-tonne-perannum LNG import terminal at Kochi is likely to remain under-utilised in FY14 as the long distance pipeline connecting the terminal to potential buyers is not ready. The company had earlier planned to commission the plant in December 2012, but it now has postponed the commissioning to June. The terminal won’t generate much revenues initially, but the company will have to book depreciation and interest costs towards the $840-million investment, impacting the profitability.
The company has many plans to grow in the medium to long-term. A new berth at Dahej will enable handling of more vessels at the terminal. Power generation plants are being planned near Dahej and Kochi terminals, while a greenfield unit is being planned in Andhra Pradesh. The company has also signed supply contracts with various LNG producers to ensure steady flows. The company’s utility business with stable regassification charges and long-term contracts with low regulatory risks make it an attractive investment at the current price-to-earnings ratio of 9.1. Nevertheless, investors are unlikely to favour the scrip until the company is able to sail through its stagnant phase over the next 2-3 quarters.
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