Dahej expansion, LNG demand give Petronet a lift

MUMBAI: Petronet LNG, the owner of India's largest regasification terminal, is emerging as a bright spot for investors desperately scurrying for stocks with a low probability of slippage on their projected earnings in the near term.
Thanks to the early commissioning of expanded capacity of its Dahej terminal and robust demand for the liquefied natural gas (LNG) in the past few months, Petronet LNG's projected earnings per share (EPS) estimates rose 7-13% for the current and next fiscal year.

As a result, the stock slipped a measly 2% in the past one month when many quality stocks saw sharp dips.

The company expanded capacity of its Dahej terminal to 15 million tonne per annum (mtpa) from 10 mtpa before the schedule.

Petronet's re-gasified gas volumes increased by 12% sequentially to 184 trillion British thermal unit (BTU).This implies Dahej terminal annualised volumes could reach 14.2 mtpa. The Street is factoring in 14.2 and 16.3 mtpa for the current and the next fiscal, respectively, versus 14 and 15.8 mtpa earlier. Typically , every incremental 1mtpa of gas volume increases its projected EPS by 9%.

Petronet is entitled to get revenues irrespective of volumes re-gassified in its terminals due to take-or-pay clause it signs with its customers.This is a key reason for the earnings visibility for the company. Also, Petronet has financed the expansion using advance from customers instead of debt.

It has started to build an additional capacity of 2.5 mtpa at Dahej terminal investing `1,200 crore.

In addition, the 8% utilisation of the Kochi terminal in the September quarter is expected to improve with the commissioning of BPCL's refinery . Further, the completion of KochiMangalore pipeline in about 18 months will likely increase utilisation to 45-50%.

Petronet has formulated a dividend payout policy at 30% of profits or 5% of networth, higher compared to 20% between FY14 and FY16.