2QFY2012 Result Update | Oil & Gas

October 18, 2011

Petronet LNG
Performance Highlights
Y/E March (` cr) Net sales EBITDA EBITDA margin (%) PAT
Source: Company, Angel Research

NEUTRAL
CMP Target Price
% chg (yoy) 1QFY12 % chg (qoq)

`161 -

2QFY12

2QFY11

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

5,367 448 8.4 260

3,058 273 8.9 131

75.5 64.5 (56)bp 98.5

4,623 438 9.5 257

16.1 2.3 (112)bp 1.4

Oil & Gas 12,105 0.7 186/105 410129 10 16,748 5,038 PLNG.BO PLNG@IN

Petronet LNGs (PLNG) 2QFY2012 net sales increased by 75.5% yoy to `5,367cr on the back of higher volumes and improved realization. Net profit increased by 98.5% yoy to `260cr. We maintain our Neutral view on the stock. Robust volume growth and price increases drive sales growth: PLNGs R-LNG increased by 35.1% yoy to 135TBTU mainly due to increased spot and contracted volumes. Contractual volumes stood at 91TBTUs and spot volumes stood at 44TBTUs. The companys utilization stood at 106% at its Dahej terminal in 2QFY2012. Also, average realization improved by 29.7% yoy to `397/mmbtu. On account of these, PLNGs net sales grew by 75.5% yoy to `5,367cr. Strong growth in net profit: EBITDA/mmbtu increased to `33.2 (up 21.9% yoy) mainly on account of increased spot volumes, which have higher margins compared to contracted volumes. Other expenditure increased by 278.1% yoy to `99cr. Hence, despite higher growth in net sales, EBITDA increased by only 64.5% yoy to `448cr and EBITDA margin declined marginally by 56bp yoy to 8.4% in 2QFY2012. Other income increased by 8.2% yoy to `20cr, while tax rate decreased to 30.8% in 2QFY2012 compared to 32.3% in 2QFY2011. Hence, the companys net profit grew by 98.5% yoy to `260cr. Outlook and valuation: For 2QFY2012, PLNG reported strong revenue and profit growth. However, the companys capacity utilization at Dahej terminal (106%) almost peaked in 2QFY2012, indicating a further increase in volume growth will remain capped in the near term. Nevertheless, demand for natural gas remains robust in India, while domestic supply fails to meet the shortfall, thus boosting prospects for PLNGs business. However, we believe the current rich valuations discount the robust growth prospects of PLNG. The stock is currently trading at 11.8x FY2012E and 11.7x FY2013E EPS. We maintain our Neutral view on the stock. Key financials
Y/E March (` cr) Net sales % chg Net profit % chg EPS (`) OPM (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.0 7.9 14.7 27.3

Abs. (%) Sensex PLNG

3m 12.6

1yr 42.5

3yr 67.9 312.8

(8.3) (15.4)

FY2010 10,649 26.3 404 (22.0) 5.4 7.9 29.9 5.4 19.2 14.3 1.3 16.2

FY2011 13,133 23.3 555 37.3 8.3 8.8 19.5 4.5 25.2 18.2 1.1 11.5

FY2012E 20,642 57.2 1,030 85.5 13.7 8.9 11.8 3.4 33.1 23.7 0.7 7.7

FY2013E 24,221 17.3 1,039 0.8 13.8 8.1 11.7 2.7 26.1 20.4 0.6 7.0

Bhavesh Chauhan
Tel: 022- 39357600 Ext: 6821 Bhaveshu.chauhan@angelbroking.com

Please refer to important disclosures at the end of this report

Petronet LNG | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 performance

Y/E March (` cr) Net sales COGS % of Net sales Operating expenditure % of Net sales Total expenditure % of Net sales Other operating income EBITDA % of Net sales Interest Depreciation Other income Profit before tax % of Net sales Provision for tax % of PBT Profit after tax % of Net sales
Source: Company, Angel Research

2QFY12 5,367 4,814 89.7 105 2.0 4,919 91.6 0.0 448 8.4 46 46 20 376 7.0 116 30.8 260 4.9

2QFY11 3,058 2,755 90.1 31 1.0 2,786 91.1 1.0 273 8.9 49 47 19 195 6.4 63 32.3 131 4.3

yoy % 75.5 74.7 233.9 76.5 (100.0) 64.5 (7.4) (0.7) 8.2 92.9 84.1 98.5

1QFY12 4,623 4,133 89.4 52 1.1 4,185 90.5 0.0 438 9.5 46 46 26 372 8.1 116 31.0 257 5.6

qoq 16.1 16.5 100.9 17.5

2.3 (1.2) 1.1 (23.4) 1.1 0.4 1.4

Strong volume growth and higher realization drive net sales growth
PLNGs R-LNG increased by 35.1% yoy to 135TBTU mainly on account of increased spot and contracted volumes. Contractual volumes stood at 91TBTUs and spot volumes stood at 44TBTUs in 2QFY2012. The companys utilization stood at 106% at its Dahej terminal during 2QFY2012. Also, average realization improved by 29.7% yoy to `397/mmbtu. On account of these, the companys net sales increased by 75.5% yoy to `5,367cr.

Exhibit 2: Sales volume trend

120 100 80 60 40 20 0

Exhibit 3: Net sales growth trend

6,000 5,000 4,000 40 30 20 10 -10 -20 -30 -40

(` cr)

2,000

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

1,000 0

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Contracted LNG Sales (tbtu)

Spot Cargo and tolling volumes sales (tbtu)

Net sales (LHS)

yoy growth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

2QFY12

October 18, 2011

(%)

3,000

Petronet LNG | 2QFY2012 Result Update

Strong growth in net profit

EBITDA/mmbtu grew by 21.9% yoy to `33.2 mainly on account of increased spot volumes, which have higher margins compared to contracted volumes. Other expenditure increased by 278.1% yoy to `99cr due to forex loss of `53cr. Hence, despite higher growth in net sales, EBITDA increased by only 64.5% yoy to `448cr and EBITDA margin declined marginally by 56bp yoy to 8.4% in 2QFY2012. Other income increased by 8.2% yoy to `20cr, while tax rate decreased to 30.8% in 2QFY2012 compared to 32.3% in 2QFY2011. Hence, net profit grew by 98.5% yoy to `260cr.

Exhibit 4: EBITDA and EBITDA margin trend

500 450 400 350 300 250 200 150 100 50 0
2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

Exhibit 5: Net profit and net margin trend

12 10 8 300 250 200 6.0 5.0 4.0

(` cr)

(` cr)

(%)

6 4 2 0

100 50 0

2.0 1.0 0.0

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

EBITDA (LHS)

EBITDA margin (RHS)

Net profit (LHS)

Net margin (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

2QFY12

October 18, 2011

(%)

150

3.0

Petronet LNG | 2QFY2012 Result Update

Investment arguments
Capacity additions to drive volume growth: PLNG plans to double its capacity at the Kochi terminal to 5mn tonnes by FY2013, while its phase-3 expansion at Dahej terminal will take its capacity to 15mn tonnes by FY2016. LNG import model viable going ahead: We believe LNG is likely to be a key source of gas supplies in the medium term on account of strong gas demand in the country. Hence, PLNG is a proxy play on the increasing gap between natural gas supplies and demand in the country. The delay in the KG basin gas ramp-up has further helped the matters. Moreover, the government is making efforts to maintain long-term viability of LNG in the overall gas mix of the country. Government could act on the Mercados Energy Markets International report regarding uniform domestic gas pricing. This move, if implemented, is likely to increase marketability of R-LNG in the country.

Outlook and valuation

For 2QFY2012, PLNG reported strong revenue and profit growth. However, the companys capacity utilization at Dahej terminal (106%) almost peaked in 2QFY2012, indicating a further increase in volume growth will remain capped in the near term. Nevertheless, demand for natural gas remains robust in India, while domestic supply fails to meet the shortfall, thus boosting prospects for PLNGs business. However, we believe the current rich valuations discount the robust growth prospects of PLNG. The stock is currently trading at 11.8x FY2012E and 11.7x FY2013E EPS. We maintain our Neutral view on the stock.

Exhibit 6: Angel EPS forecast vs. consensus

Angel forecast FY2012E FY2013E
Source: Company, Angel Research

Bloomberg consensus Variation (%) 12.0 12.8 14.5 8.2

13.7 13.8

Exhibit 7: Recommendation summary

Companies Ind. Gas GSPL Gujarat Gas Petronet LNG CMP (`) 396 97 421 161 TP (`) 117 Neutral Buy Neutral Neutral Reco Mcap (` cr) 5,537 5,446 5,396 12,105 Upside 21 P/E (x) 16.8 9.5 18.0 11.8 15.8 8.8 16.2 11.7 P/BV (x) FY13E 3.6 1.8 4.6 2.7 4.4 2.2 5.4 3.4 EV/EBITDA (x) FY12E 9.0 6.1 10.2 7.7 8.2 5.4 9.0 7.0 RoE (%) 29.1 25.6 32.6 33.1 25.3 22.7 30.7 26.1 RoCE (%) 33.1 23.5 34.0 23.7 31.0 22.3 32.9 20.4 (%) FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E

Source: Company, Angel Research

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Exhibit 8: One-year forward P/E

400 350 300 250

(`)

200 150 100 50 0

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Apr-11

Price

5x

10x

15x

20x

25x

Source: Company, Angel Research

Oct-11

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Profit & loss statement

Y/E March (` cr) Total income % chg Total Expenditure Net Raw Materials Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortization EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY08 6,555 19.0 5,689 5,566 21 102 866 33.7 13.2 102 764 39.9 11.7 102 54 7.5 715 50.4 715 241 33.6 475 475 475 51.5 7.2 6.3 6.3 51.5 FY09 8,429 28.6 7,527 7,376 20 132 901 4.1 10.7 103 799 4.6 9.5 101 77 9.9 774 8.2 774 256 33.0 518 518 518 9.2 6.2 6.9 6.9 9.2 FY10 10,649 26.3 9,803 9,665 20 117 846 (6.1) 7.9 161 686 (14.2) 6.4 184 98 16.3 599 (22.5) 599 195 32.5 404 404 404 (22.0) 3.8 5.4 5.4 (22.0) FY11 13,133 23.3 11,981 11,801 31 149 1,152 36.1 8.8 185 967 41.1 7.4 193 68 8.1 842 40.5 842 287 34.1 555 555 555 37.3 4.2 8.3 8.3 53.2 FY12E 20,642 57.2 18,806 18,578 34 194 1,836 59.4 8.9 199 1,637 69.3 7.9 225 92 6.1 1,504 78.6 1,504 474 31.5 1,030 1,030 1,030 85.5 5.0 13.7 13.7 66.3 FY13E 24,221 17.3 22,256 21,993 40 223 1,965 7.0 8.1 286 1,679 2.6 6.9 259 96 6.4 1,516 0.8 1,516 478 31.5 1,039 1,039 1,039 0.8 4.3 13.8 13.8 0.8

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Balance sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Net Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 1,972 404 1,568 1,061 547 1,148 359 361 428 859 289 3,465 1,975 506 1,469 1,847 304 1,810 658 78 1,074 892 917 4,537 3,550 667 2,883 1,318 539 1,222 340 152 729 901 321 5,061 3,554 851 2,702 2,203 1,165 1,387 154 138 1,095 1,213 174 6,244 3,754 1,050 2,703 3,203 1,165 2,329 469 138 1,721 1,807 521 7,593 6,354 1,336 5,018 1,403 1,165 3,410 1,252 138 2,020 2,107 1,304 8,889 750 869 1,619 1,578 269 3,465 750 1,233 1,983 2,282 272 4,537 750 1,485 2,235 2,500 326 5,061 750 1,930 2,680 3,216 348 6,244 750 2,792 3,542 3,703 348 7,593 750 3,653 4,403 4,138 348 8,889 FY08 FY09 FY10 FY11 FY12E FY13E

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Cash flow statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances 85 18 340 359 572 299 359 658 65 (317) 658 340 FY08 715 102 159 (50) (169) 757 (604) (261) 41 (823) 194 (110) FY09 774 103 (338) (73) (266) 199 (788) 246 69 (473) 704 (132) FY10 599 161 303 (45) (164) 854 (1,047) (234) 45 (1,236) 218 (154) FY11 906 185 (108) 142 (218) 907 (889) (626) 39 (1,477) 716 (131) (202) 383 (187) 340 154 FY12E 1,504 199 (32) (474) 1,197 (1,200) (1,200) 487 (169) 318 315 154 469 FY13E 1,516 286 1 (478) 1,326 (800) (800) 435 (177) 258 783 469 1,252

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV/Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT/Interest) 0.4 0.8 7.5 0.7 1.5 7.9 0.7 1.9 3.7 0.7 1.6 5.3 0.6 1.1 7.3 0.4 0.9 6.5 3.3 8.4 18.5 26.5 2.5 4.3 10.3 21.7 28.3 4.1 3.9 10.4 20.1 27.6 4.1 3.7 6.5 18.8 27.1 0.0 5.6 5.6 19.3 25.8 0.6 4.8 6.4 21.8 29.2 0.4 24.0 46.3 32.8 20.0 49.5 28.8 14.3 29.9 19.2 18.2 36.9 25.2 23.7 59.8 33.1 20.4 60.9 26.1 11.7 66.4 2.7 20.9 4.6 0.7 32.2 9.5 67.1 2.7 17.5 3.5 0.8 28.8 6.4 67.5 2.7 11.9 5.2 0.8 17.5 7.4 68.4 2.9 14.5 4.6 0.8 22.5 7.9 68.5 3.8 20.6 4.5 0.3 26.0 6.9 68.5 8.1 38.6 4.5 0.2 46.0 6.3 6.3 7.7 1.5 21.6 6.9 6.9 8.3 1.8 26.4 5.4 5.4 7.5 1.8 29.8 8.3 8.3 10.7 1.8 35.7 13.7 13.7 16.4 1.9 47.2 13.8 13.8 17.7 2.0 58.7 25.5 21.0 7.5 0.9 1.9 14.8 3.7 23.3 19.5 6.1 1.1 1.6 14.9 3.0 29.9 21.4 5.4 1.1 1.3 16.2 2.7 19.5 15.1 4.5 1.1 1.1 11.5 2.2 11.8 9.8 3.4 1.2 0.7 7.7 1.9 11.7 9.1 2.7 1.3 0.6 7.0 1.6 FY08 FY09 FY10 FY11 FY12E FY13E

October 18, 2011

Petronet LNG | 2QFY2012 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Petronet LNG No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 18, 2011

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