Home / Markets / Mark To Market /  Petronet LNG may gain from rebound in Dahej utilizations as economy opens up

NEW DELHI : Petronet LNG Ltd gained more than 4% on the bourses on Tuesday. The gains are being led by the expectation of a rebound in demand and are benefiting Petronet LNG’s imports and sales volumes with the opening up of the economy as covid-led lockdowns end. While lockdowns impacted the company in the June quarter, the management commentary at the post-result conference call with analysts also exuded confidence on a rebound.

Analysts say Petronet will try to make up for lost volumes ahead. The September quarter, or Q2, should be good with Dahej utilization already having reached 90-95% in July 2021. Notably, the company’s Dahej terminal in Gujarat had operated at 88% capacity during the June quarter. The company’s long-term volume fell 13% sequentially. Some support though was provided by tolling that was steady and increased up 2%. However, Kochi terminal utilization was at 24%. Not surprising, the company’s total volumes were down 4% sequentially at 209tbtu (trillion British thermal units).

The company had seen adjusted net profit grow just 2% sequentially though they were up 22.2% year-on-year.

Meanwhile, rise in spot LNG prices, which analysts say are high now at $16.5/mmbtu (metric million British thermal units), is also a positive for the company. Term LNG is cheaper at $9/mmbtu, and customers are looking to shift, suggests a result note by Emkay Global Financial Services. The company also has 16.5 mmtpa (million tonnes per annum) of capacity booked, including a 0.75 mmtpa two-year contract.

On the flipside, the volume upside from the Kochi terminal may not be significant till Kochi-Bengaluru pipeline connectivity is completed.

Though looking at the first-quarter miss in performance and also high spot LNG prices analysts at cutting down estimates, they still see upside to earnings. For instance, analysts at Emkay Global have cut FY22, FY23, FY24 earnings estimates by 2-4%, assuming lower volumes due to rising domestic gas supplies and high spot LNG prices. However, their FY23 earnings estimates show 9.6% growth over FY22 earnings estimates

Those as HDFC Securities Ltd say that their positive recommendation on Petronet LNG is premised on robust volume offtake in FY22 and FY23, supported by the bounce-back in gas demand with the opening of the economy, which will ensure high LNG imports, in turn allowing full utilization at Dahej on its expanded capacity.

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