Petronet misses Q4 expectations, but outlook and valuations still favourable

Petronet

MUMBAI: Petronet LNG Ltd disappointed the Street with its March quarter performance, which missed expectations. The stock was down over 1% on Wednesday.

The impact of lockdown on volume growth was the key reason for missing earnings’ estimates, said analysts. Total volumes were flat on year at 218tBtu (trillion British thermal units), and down 7% sequentially. Analysts at Motilal Oswal Financial Services had pegged volumes at 231 tBtu. The company, however, fared better than its peers.

The key terminal for Petronet, Dahej, saw volumes decline 1% year-on-year (YoY) and 12% sequentially, suggests Jefferies India Pvt Ltd data. Analysts at Jefferies said utilisation at 91% was the lowest since 1QFY21 on lower spot volumes in January due to a sharp spike in spot LNG prices.

Kochi terminal, however, saw volumes rise 8% YoY. The utilisation was at 19%. But Kochi’s contributions to overall volumes are much smaller than Dahej. The company gets 95% of its volumes from Dahej.

While a fall in Petronet’s volumes is disappointing, in a positive of sorts, the industry as a whole also saw a significant decline in volumes, which resulted in the company gain market share. Petronet’s market share rose 700bps YoY to 68% said analysts at Jefferies India Ltd.

Revenues at Rs7,575 crore fell about 17% YoY and the company’s operating performance missed expectations as well, due to higher costs. Higher employee cost was led by the covid-related provisions. Fixed costs rose more than expected and resulted in negative operating leverage, said analysts.

Ebitda at Rs1,091 crore also missed MOFSL analysts’ estimates by about 5%. With lower-than-expected operating performance, net profit was bound to miss expectations but lower income worsened woes. Other income declined 56% sequentially and 57% year-on-year. As per Jefferies, sequential declines were due to a Rs18 crore forex loss booked during the quarter as opposed to Rs30 crore forex gain in 3QFY21.

With lower-than-expected performance in Q4FY21, and the June quarter also likely to witness some impact of lockdowns, it is not surprising analysts are tweaking their forward estimates. Analysts at Jefferies have lowered their volume estimates for FY22-23 by 1.5-2% and built-in negative operating leverage.

Meanwhile, the stock trades at cheap valuations of 11.5 time FY22 earnings estimates.

News Source: Moneycontrol

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