Saturday, January 28, 2012

>PETRONET LNG: Interest expense falls due to debt prepayment

Petronet LNG’s Q3 FY12 results beat our expectations due to all-time high capacity utilization of 114% (our estimate: 105%) and was reinforced by marketing margin (implied) of ~Rs 58/mmBtu (our estimate: Rs 28/mmBtu).

Capacity utilization at 114%, 8% above estimate
The company continues to utilize its Dahej terminal to the maximum with sales of 144.9 tbtu, 8.3% ahead of our expectation of 133.9 tbtu. Thus, capacity utilization stood at 114% during Q3 FY12, as against 106% in Q2 FY12. We raise our FY12 capacity utilization estimate to 109% driven by the persistent demand-supply gap of natural gas in India.

Implied Q3 FY12 marketing margin at Rs 58/mmBtu
Strong demand for natural gas has enabled Petronet to earn marketing margin of Rs 58.2/mmBtu on spot cargoes, which was much above our expectation of Rs 27.8/mmBtu. Notably, such a high margin was earned on spot LNG which was priced around $ 14-16/mmBtu during Q3 FY12. We expect the company to continue to earn healthy marketing margins in the near term.

Revenue at Rs 63,303 mn, up 75% y-o-y
Total revenue came in at Rs 63,302.6 mn, 17% ahead of our estimates led by higher capacity utilization and high marketing margins. Sales increased 74.5% yo-y on account of sales volumes increasing by 21.1% & blended regas margins higher by 39%. The q-o-q jump of 18% in revenue reflects higher marketing margin of Rs 58.2/mmBtu earned during Q3 FY12, compared to Rs 37.1/mmBtu in Q2 FY12.

EBITDA at Rs 5,572 mn, up 61.2% y-o-y
Q3 FY12 EBITDA stood at Rs 5,572.5 mn, 24.5% ahead of our expectation, driven by higher than expected marketing margin. OPM stood at 8.8%, higher than our estimate of 8.3%, but lower than Q2 FY12 OPM of 9.3%.

Interest expense falls due to debt prepayment
While depreciation was flat y-o-y & q-o-q at Rs 462.9 mn, interest expense was Rs 344.7 mn which was 24.8% lower q-o-q due to prepayment of debt of Rs 5,000 mn. The steep depreciation of the rupee has necessitated (as per accounting rules) entry of a notional forex loss of Rs 540 mn on the books.

PAT of Rs 2,954 mn, 17% ahead of estimates
Consequently, Q3 FY12 PAT stood at Rs 2,953.9 mn, up 72.9% y-o-y & 13.5% q-oq. EPS for the quarter was Rs 3.9 compared to Rs 3.5 in Q2 FY12.

To read the full report: PETRONET LNG