MUMBAI: Petronet LNG Ltd disappointed the streets with its March quarter performance, which exceeded expectations. The stock was down more than 1% on Wednesday.
The impact of the foreclosure on volume growth was the main reason for the lack of earnings estimates, analysts said. Total volumes were stable year over year at 218 tBtu (trillions of British thermal units), and down 7% sequentially. Motilal Oswal Financial Services analysts had set volumes at 231 tBtu. However, the company is doing better than its peers.
Petronet’s key terminal, Dahej, saw volumes decline 1% year-on-year and 12% sequentially, data from Jefferies India Pvt Ltd. suggests. Jefferies analysts said 91% utilization was the lowest since 1QFY21 on lower spot volumes in January due to a sharp rise in LNG spot prices.
The Kochi terminal, however, saw its volumes increase by 8% year-on-year. Utilization was 19%. But Kochi’s contributions to overall volumes are much lower than Dahej’s. The company derives 95% of its volumes from Dahej.
While a decline in Petronet’s volumes is disappointing, somewhat positive, the industry as a whole has also seen a significant drop in volumes, which has helped the company gain market share. Petronet’s market share increased 700 basis points year-on-year to 68%, according to analysts at Jefferies India Ltd.
Revenues at Rs7.575 crore fell about 17% year-on-year and the company’s operating performance also exceeded expectations, due to higher costs. The increase in labor costs is due to the provisions related to covid. Fixed costs rose more than expected and resulted in negative operating leverage, analysts said.
Ebitda at Rs1,091 crore also missed MOFSL analysts estimates by around 5%. With operating performance below expectations, net income was doomed to fall short of expectations, but declining revenues made the problems worse. Other revenue was down 56% sequentially and 57% year-on-year. According to Jefferies, the sequential declines were due to an Rs18 crore forex loss recorded during the quarter, as opposed to an Rs30 crore forex gain at 3QFY21.
With lower than expected performance in the fourth quarter of FY21 and the June quarter also likely to witness an impact from lockdowns, it’s no surprise that analysts are changing their forward-looking estimates. Jefferies analysts lowered their volume estimates for FY22-23 from 1.5% to 2% and incorporated negative operating leverage.
However, the outlook for Petronet remains strong. The increased demand for gas in the country will continue to generate benefits for the company and the gap between supply and demand will keep gas imports firm.
Meanwhile, the stock is trading at cheap valuations of 11.5 times the earnings estimates for fiscal 22.
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