“PLNG’s utility nature of business (stable re-gasification margins and term contracts), low regulatory risks (re-gasification margins are not currently under PNGRB’s purview) and expanding volumes on account of strong demand estimates, hold it in good stead. We believe the concerns over the regulatory intervention on the marketing margin front as well as PNGRB regulating Regas charges are exaggerated. However, the concerns are duly factored in the stock price,” the broking firm has stated.
“We maintain ‘BUY’, with a DCF-based target price of Rs193/share, implying a P/E of 10.0x FY13E,” Prabhudas Liladher has sated.
According to the broking firm, the company had a stellar 2011 with 40% outperformance with benchmark indices. PLNG has witnessed 2012 as a muted year with YTD underperformance of ~18%, the same is on account regulatory concerns led by PNGRB intent to overlook marketing margins and potential threat of review of Regasification charges.
“However, we believe, the concerns are exaggerated and are largely factored into the stock price. If PNGRB were to regulate the marketing margins as well as Regasification tariffs (14% project IRR), we believe the fair value in such an event falling to Rs132/share. However, we believe chances of occurrence of such an event remains remote. We
are cutting our earnings estimates by 11.6% and 17.2% respectively for FY13E and FY14E. The lower earnings is transpired by lower volumes estimates for FY13E on account of lower volumes at Dahej( factoring limited flexibility in operations due to storage tanks) as well as Kochi terminal. Similarly for FY14E, the earnings cut is largely on account of delay in commissioning of the jetty (now in Q4FY14 against earlier estimate of Q2FY14),” the brokerage firm has stated.
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