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Petronet’s flagship Dahej terminal processed 206 tBtu (trillion British thermal units) of LNG
Petronet’s flagship Dahej terminal processed 206 tBtu (trillion British thermal units) of LNG

Petronet LNG’s Q4FY20 shows covid-19 impact; competition key concern ahead

  • Given that the lockdown continued for a good part of the June quarter, it would weigh on Petronet's volumes
  • Going ahead, benign LNG prices are expected to improve demand prospects for Petronet

Shares of Petronet LNG Ltd are just 6% away from its highs in January on NSE. Petronet imports and regasifies LNG (liquefied natural gas).

In keeping with the performance of other companies, Petronet too felt covid-19 lockdown’s adverse impact for the March quarter. Reported earnings before interest, tax, depreciation and amortisation (Ebitda) at almost Rs698 crore was below many analysts’ estimates. Apart from lower volumes, the company’s profitability was hurt owing to a forex loss of 180 crore and a one-time contribution of 100 crore to the PM cares fund.

The company’s flagship Dahej terminal processed 206 tBtu (trillion British thermal units) of LNG, representing a 7% decline from the December quarter. In other words, the Dahej terminal utilisation stood at about 93% in the March quarter compared to about 100% in the December quarter. Although for the year as the whole, the picture doesn’t look bad. Petronet said, the Dahej terminal operated at around 103% of its name plate capacity in FY20, processing 885 tBtu of LNG, which is the highest ever in a year.

Given that the lockdown continued for a good part of the June quarter, it would weigh on volumes. The good news is that Dahej utilisation levels are now at 100% in June from about 55-60% in April-May.

On the other hand, the utilisation of the Kochi terminal is expected to improve to 30-35% post the commissioning of the Kochi-Mangaluru pipeline by the end of this month.

Analysts from Credit Suisse Securities (India) Pvt. Ltd said in a report on 30 June, “Risk of lower regasification tariff at Kochi exists." The broking firm added, “Petronet has already cut the regasification tariff at Kochi terminal to Rs79.14 but the offtakers are demanding a lower tariff."

Meanwhile, it is encouraging that Petronet has increased the dividend to Rs12.5 per share in FY20 (dividend payout at about 70%) from Rs10 per share in FY19.

Going ahead, benign LNG prices are expected to improve demand prospects for Petronet.

But near-term upsides for the stock could well be limited. Antique Stock Broking Ltd maintains its ‘hold’ rating on the stock. “We expect FY21 to be challenging in terms of throughput, on account of lower utilization stemming from lockdown," wrote Nitin Tiwari on Antique in a report on 1 July. “In addition the competitive intensity in the LNG import segment is rising with construction and commissioning of newer capacities and that could make the business environment challenging for Petronet," added Tiwari.

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