Even as Reliance Industries Ltd’s investors worry about production ramp-up issues at its KG D6 natural gas field off India’s east coast, Petronet LNG Ltd’s investors will be cheering the unintended impact on their company’s performance.
The gas shortage has forced users to look for the fuel from other sources and this is reflected in Petronet LNG’s March quarter results.
The natural gas importer’s March quarter numbers were good and ahead of the Street’s expectations. Revenue rose by 67% over the corresponding period last year to Rs 3,986 crore, driven mainly by robust volume growth of 37% to 125.75 trillion British thermal units.
According to a post-results note from Kotak Securities Ltd, the average net realization rose 20.63% on a year-on-year basis to Rs 317 per million British thermal units, up by 4.6% on a quarter-on-quarter basis.
Volumes increased by 5% sequentially, as against some analysts’ expectations of a flat performance. Petronet LNG had to import more spot cargoes to meet demand due to the gas shortage in the country.
For the March quarter, the company has operated at its full capacity of about 10 million tonnes per annum. Operating profit margins improved by 33 basis points to 8.81% from 8.48% last year. One basis point is one-hundredth of a percentage point.
Petronet LNG’s net profit more than doubled to Rs 206 crore helped by strong operating performance, flat depreciation and a 15.5% decline in interest expenses.
The company has performed well for the full year too, with revenue rising by 24%. Net profit increased at a faster pace of 53%, helped by strong operating performance and slower pace of growth in depreciation and interest costs.
Petronet LNG’s scrip seems to reflect the better operating environment for the company. The stock has outperformed the BSE-200 Index of the Bombay Stock Exchange since the beginning of the calendar year, factoring in most of the positives at the current levels.
While many analysts are positive on the prospects on the stock, some are cautious on concerns of rising liquefied natural gas (LNG) prices and the challenges that the company would face in finding buyers at higher prices. Also, there are concerns regarding the utilization of the Kochi terminal, which is expected to be commissioned by 2012-13.
In the near term, the domestic shortage of gas augurs well for Petronet LNG. But upsides in the stock could be limited from the current levels, given the recent outperformance.