The current low spot price environment bodes well for the government’s plan to bring about major reforms in the Gas sector, including the revival of gas-based power plants.
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Motilal Oswal has given a buy rating to Petronet LNG with a target price of Rs 336. The share price moved up by 0.74 per cent from its previous close of Rs 263.15. The stock’s last traded price is Rs 265.10.
The current low spot price environment bodes well for the government’s plan to bring about major reforms in the Gas sector, including the revival of gas-based power plants.
PLNG’s three concerns – (a) competition, (b) usage of cash, and (c) long-term growth – have been well-answered by management (as highlighted above). Also, the National Green Tribunal (NGT)’s actions against severely/critically polluted industrial clusters could provide a huge boost to gas consumption in the country. Financials For the quarter ended 31-03-2020, the company reported a Consolidated sales of Rs 8567.15 Crore, down -3.85 % from last quarter Sales of Rs 8910.23 Crore and up 2.19 % from last year same quarter Sales of Rs 8383.20 Crore Company reported net profit after tax of Rs 359.02 Crore in latest quarter.
Investment Rationale The brokerage said that the company had declared final dividend of INR 7/share in FY20. It expects the dividend payout (~70%) to remain strong, presenting an attractive dividend yield of 4–5% over FY21–22E (with ROE of 25–26%).
With the concerns related to Tellurian resolved and answers provided on longterm growth, the stock trades at a very appealing valuation of 12.4x FY22E EPS of INR 21.3 and 7.1x FY22E EV/EBITDA, with an EBITDA CAGR of ~15% expected over FY20–22E.
Promoter/FII Holdings Promoters held 50 per cent stake in the company as of March 31, 2020, while FIIs held 29.3 per cent, DIIs 7.8 and public and others 12.9 per cent.
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