* PLNG’s Q4FY16 results are in-line with our estimates. The company has reported a PAT of Rs.2.39 bn (v/s our estimate of Rs. 2.4 bn) up 34% qoq but down 20% yoy, resulting in a quarterly EPS of Rs.3.2 and CEPS of Rs.4.26. Sequential jump in profits is supported by higher RLNG offtake and lower base. The company has declared a dividend of Rs.2.5/ share, implying ~20% payout ratio on standalone profits.

* PLNG has further confirmed that Dahej LNG expansion (50% capacity addition to 15 mmtpa) is going on as per schedule and will be completed by Nov/Dec’16. Additionally, the management continues to expect Dahej existing plant to operate at more than 120% capacity utilization as against 111% in FY16. We have revised our volume estimates upward, factoring in higher capacity utilization. Hence, we tweak our FY17E EPS estimates to Rs.15.8 (earlier Rs.15/share) and are introducing FY18E with an EPS of Rs.21.9. We expect FY18E to be better, driven by acceleration in volume growth, supported by expansion. At CMP, we believe that the stock is reasonably valued at 12.7x FY18E earnings. Considering the medium-term positive triggers, we upgrade the stock to ACCUMULATE (earlier SELL) with a revised price target of Rs.294 (earlier Rs.220) including equity value of 26% stake in Dahej Port.

Valuation & Recommendation

* PLNG is investing Rs.24 bn in capacity expansion to 15 mmtpa from 10 mmtpa at Dahej terminal. Till FY16, the company has already invested Rs.16 bn on the project and in FY17E it will invest additional Rs.6 bn. We believe the full benefit of the same will be reflected in FY18E.

* PLNG has indicated that Dahej LNG expansion is going on as per schedule and will be completed by Nov/Dec’16. Additionally, the management expects Dahej existing plant to operate at ~120% capacity utilization as against 111% in FY16. We have revised our volume estimates upward, factoring in higher capacity utilization. Hence, we tweak our FY17E estimates to Rs.15.8 (earlier Rs.15/share) and introducing FY18E with an EPS of Rs.21.9. We expect FY18E to be better driven by acceleration in volume growth supported by expansion. At CMP, we believe that the stock is reasonably valued at 12.7x FY18E earnings. Considering the medium-term positive triggers, we upgrade the stock to ACCUMULATE with a revised price target of Rs.294 including equity value of 26% stake in Dahej Port.

 

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