Investors were aware that Petronet LNG Ltd would be the key beneficiary of the delay in ramp-up from Reliance Industries Ltd’s KG D6 block. Petronet LNG’s December quarter financial results affirm that expectation, with the company’s performance exceeding consensus estimates. Not surprisingly, its stock touched a new high of Rs132.15 per share on Wednesday, up 1.7%, in reaction to the numbers on a day when the Bombay Stock Exchange’s Sensex was down by 0.6%.
Petronet’s total operating revenue increased sharply by 62% on a year-on-year (y-o-y) basis and 18.6% on a quarter-on-quarter (q-o-q) basis to Rs3,628 crore. This growth was driven by higher sales volumes, up 20% on a sequential basis to about 119.7 trillion British thermal units (tBtu). Volumes were higher on account of considerable increase in spot LNG cargo, which was because of lower output from the KG D6 fields.
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Out of the total volumes, Petronet had 100 tBtu coming from the long-term contracts, 11 tBtu came from spot volumes and the rest from regasification services from firms such as Gujarat State Petroleum Corp. Ltd and GAIL (India) Ltd. The company derives its revenue from the above three sources.
Petronet’s operating profit increased 27% sequentially to Rs345 crore and operating profit margins increased by 64 basis points to 9.52%. One basis point is one-hundredth of a percentage point. In a post-results note, analysts from Religare Capital Markets Ltd wrote, “The company’s Ebitda (earnings before interest, tax, depreciation and amortization) per million British thermal units (mmBtu) expanded to Rs29 (up 6.5% q-o-q, 33.6% y-o-y) on account of marketing margins of about $0.4 (Rs18 today) per mmBtu earned on about 11 tBtu of non-merchant spot LNG volumes.” Further, 5% increase in regasification charges would have helped the performance.
Even though other income plummeted, flattish interest and depreciation costs boosted net performance. Net profit more than doubled on a y-o-y basis and increased by 30% from the September quarter’s to Rs171 crore. The company would source an additional 1.1 million tonnes per annum LNG for FY12 and FY13, which is expected to improve its capacity utilization.
Petronet is riding high on the domestic shortage of gas and high demand, quite evident from the stock’s outperformance against the BSE-200 index since the beginning of this fiscal. While the Street is upbeat on its prospects, the stock seems to be factoring many of the positives at the current level.
Graphic by Ahmed Raza Khan/Mint
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