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Reliance Securities
Petronet LNG (Buy)
Target: ₹335
CMP: ₹263.15
The drop in the global oil price is structurally positive for Petronet LNG, as all its long-term LNG contracts are oil-linked. So, a lower oil price scenario brings down its energy cost as well as reduces the premium of long-term contracts over the spot prices.
Kochi-Mangalore pipeline is expected to be commissioned by July 20, following which the utilisation of Kochi terminal will increase to 22 per cent in FY21 (with 28 per cent YoY growth in volume) from 17 per cent in FY20.
Mundra LNG terminal, which started operations in 3QFY20, is charging re-gas tariff of about ₹63/mmbtu compared to ₹52.4/mmbtu charged by Dahej terminal. So, any new player cannot offer any long-term contract at cheaper tariff than PLNG’s Dahej terminal.
PLNG is planning to set up LNG stations in phases. In Phase-I, it is setting up 50 stations on 5 major highways (western and southern corridor) in FY21. In Phase-II, it plans to set up around 300 LNG dispensing stations on the highways. Annual running cost of LNG-fuelled truck is estimated to be 38 per cent cheaper than diesel-operated trucks with payback period of less than 2 years.
Valuing on DCF methodology, we maintain buy on PLNG with a 2-year target of ₹335.
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