Petronet LNG Share Price Falls Despite Rs 1,200-Crore Deal With Deepak Fertilisers’ Arm; Time To Buy?

Petronet LNG share price fell over 1% on Friday, July 11, in line with the weakness in broader Indian stock market today. Petronet LNG shares declined as much as 1.58% to Rs 300.45 apiece on the BSE.

The fall in Petronet LNG share price today comes despite the company announcing a major Rs 1,200-crore service agreement with a wholly owned subsidiary of Deepak Fertilisers.

The new deal is expected to boost Petronet LNG's long-term business prospects, as it strengthens the company's service portfolio and deepens its ties within the energy and fertilizer sectors. However, the positive news couldn't lift investor sentiment amid overall market pressure.

Petronet LNG Stock Price Movement:

Despite the positive development, Petronet LNG is trading at Rs 301.45 witnessing a fall of 1.18% at 1.15 PM. The share of Petronet LNG opened at Rs 305 but slipped sharply during early trade. The stock has ended at Rs 305.05 on the (National Stock Exchange (NSE) with a minor loss after the deal.

However, the decline was in line with the overall market trend. The bse sensex is down by 664.62 points (0.80%) trading at 82,525.66, while the nifty is down by 196.45 points (0.77%) trading at 25,158.80.

All About The Deal:

Petronet LNG, one of India's leading energy infrastructure companies, has signed a Rs 1,200 crore regasification agreement with Performance Chemiserve Ltd, a wholly owned subsidiary of Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL) group.

This is a 5.5-year agreement where Petronet will receive, store, and regasify 25.6 TBTUs of liquefied natural gas (LNG) annually at its Dahej terminal in Gujarat, which is also one of the busiest LNG terminals in the world.

The contract will start between May and July 2026 and run through December 31, 2031, following an initial ramp-up phase during 2026. The re-gasified LNG will be used at Deepak Fertilisers' Taloja plant in Maharashtra, with supply secured from Norway-based energy firm Equinor.

"The deal could generate an additional revenue of upto 20%, over the contract duration and strengthen Petronet LNG's position in the industrial and fertilizer sectors," according to the exchange filing data.

"In FY 2024-25, the company handled around 18 million metric tonnes per annum (MMTPA) of LNG across its terminals, with Dahej being its flagship facility," the Petronet LNG Filing added.

Petronet LNG Share Price Outlook:

Petronet LNG share price recently received a rating boost from brokerage firm Motilal Oswal Financial Services (MOFSL). MOFSL upgraded the rating on the stock rating to 'Buy' and raised Petronet LNG share price target to Rs 410 apiece from Rs 315 per share earlier.

At 9.7x FY27 P/E and 4% dividend yield, MOFSL believes Petronet LNG stock price valuations are at absolute rock-bottom levels and the stock is at a point of maximum pessimism. It expects capacity expansion can drive a re-rating in the stock, while volumes in the coming years are likely to benefit from lower spot LNG prices starting in FY27, along with an already soft crude price outlook.

"We move to a DCF-based TP (earlier 10x FY27 PE) and assume a 10% tariff cut in Dahej and Kochi in FY28, 4% escalation thereafter, 2% terminal growth, and 11.2% WACC, leading to a TP of Rs 410 per share. While we build in full capex for the petchem venture, we value it at only 0.5x equity," MOFSL said.

On the technical front, Petrnet LNG have been trading in a narrow range.

"After a 28% drop over 33 weeks, Petronet has been trading in a tight range of 318-280 for the past 12 weeks, showing no clear signs of a breakout yet. A decisive breach above 320 will be essential to unlock fresh momentum, potentially driving the stock towards the 350 mark.

Conversely, a close below 280 will likely trigger further weakness and drag the stock down to around 240. For now, the range-bound structure looks set to continue for another 8 weeks as a breakout remains out of sight," said Anshul Jain, Head of Research at Lakshmishree Securities.

Petronet LNG Share Price Performance:

The stock has a 52-week high of Rs 384.20 and a low of Rs 269.90. The company has a market capitalization of Rs 45,232 crore. Over the past month, the share price dipped by 2.52%, but it has gained 5.88% in the last three months.

However, the stock is down 11.72% over the past year. Looking at a longer-term view, it has grown by 35.66% over the past three years. Financially, Petronet LNG has a Price-to-Earnings (P/E) ratio of 11.52, slightly above the sector average of 10.23.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.