>PETRONET LNG: 4QFY10 marginally lower than our estimate (JM FINANCIAL)

■ Marginally lower PAT: Petronet LNG reported 4QFY10 sales at Rs23,855mn, lower than our estimate of Rs24,860mn by 10% primarily due to gas volume being lower at 92TBTU against our estimate of 97TBTU. EBIDTA at Rs.202mn was lower than our estimate of Rs2,278mn by 13% on the back of lower volumes. However, higher than estimated other income (Rs331mn against estimate of Rs171mn) ensured that PAT at Rs974mn was only marginally lower than our estimate of Rs984mn.

■ Volume led growth in the near-term: Over the next three quarters, we expect volume led growth for Petronet LNG. For 1QFY11E, we had estimated that GSPC would import three cargoes, and the first cargo has recently been imported. In our previous report, we factored in LNG for Pragati Power and ONGC (C2-C3) extraction in 2QFY11E and 3QFY12E. However, with lack of clarity on Pragati Power and ONGC contracts, we defer volumes from both potential customers by one quarter each. Hence, we now estimate Pragati Power start-up in 3QFY11E and ONGC in 4QFY11E. However, our volume estimate for FY11E remains unaffected due to this change.

■ We retain our regas margin assumption: In our previous note, we highlighted the impact of the gas purchase cost on the company and estimated net regas margins at Rs27.0/mmbtu in FY11E. The 4QFY10 regas margin at Rs26.9/mmbtu is in line with our estimate and hence, we do not change the regas margin assumption.

■ Valuations; March’11 target price Rs91, BUY: Since our last report dated 25th January, 2010, Petronet LNG stock price has risen by c.7.5% from Rs76 to Rs81.8. With no change in volume or margins as highlighted above, we retain our target price of Rs91, indicating an upside of 11% from current levels and maintain our BUY rating.

To read the full report: PETRONET LNG