Petronet LNG: Good performance but caution on Kochi terminal
The progress on the Kochi terminal is an important measure to keep a tab on
At the Petronet LNG Ltd conference call on the December quarter results, an analyst asked whether the management was less optimistic on the Kochi terminal than earlier. The management response was: “When the progress is not as per target, then you are more conservative." While Petronet’s December quarter results are excellent, the management commentary on Kochi terminal is rather cautious.
Firstly, the commissioning, which was earlier meant to take place by the end of the current quarter, has been postponed to April. While the first phase of the pipeline is in place, it’s the second that is leading to delays. Of course, volumes at the Kochi terminal are expected to be low in the initial phases, which anyway investors had been expecting. So that really should not come as a surprise. Still, for a company that’s delivered very good numbers almost every quarter for a while now, the progress on the Kochi terminal is an important measure to keep a tab on.
Simply put, it’s the next key phase of growth for the company. The good thing about this is that most analysts were not very optimistic anyway on the timelines for Kochi. However, some earnings downgrades for the next fiscal year are likely to happen.
Coming back to last quarter’s performance, Petronet clocked its highest quarterly net profit and highest quarterly revenue. Net profit stood at about ₹ 319 crore, a tad higher than ₹ 315 crore seen in the September quarter. But with a higher base, year-on-year growth rates have come down. For the December quarter, revenue increased by 33% from a year ago, the slowest rate in the last seven quarters. The company did total regasification volumes to the tune of 140 trillion British thermal units (tBtu) in the December quarter, higher than 135 tBtu in the September quarter. Regasification involves the conversion of liquified natural gas back into a gaseous form.
Not surprisingly, the Petronet stock went up on Monday in reaction to the numbers. At the current market price, it trades at around 11 times its estimated earnings for FY14. While valuations do appear attractive, as mentioned earlier, following the developments on the Kochi terminal is essential.
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