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Petronet LNG Detailed Fundamental Analysis for Trdaers

Fundamental Analysis of Petronet LNG

With the government lately proposing numerous plans to satisfy the rising energy demand in India, energy logistics firms have come into the spotlight. One such firm in charge of managing LNG imports into the nation is Petronet LNG, a public sector initiative. We shall do a basic study of Petronet LNG in this article to determine whether or not its future is promising.

Fundamental Analysis of Petronet LNG

An outline of the company’s operations will be provided before we go on to a brief discussion of the gas industry. The past performance of the stock will then be highlighted in a few sections on the financials. The essay is concluded with a highlight and a list of future plans. So let’s get started right away.

Company Overview

A joint venture involving GAIL (India) Limited (GAIL), Oil and Natural Gas Corporation Limited (ONGC), Indian Oil Corporation Limited (IOCL), and Bharat Petroleum Corporation Limited produced Petronet LNG Limited (PLL) in 1998. (BPCL). Everyone owns a 12.50% share in the business as of the moment.

Liquefied natural gas is imported, stored, and regasified by PLL (LNG). Over 40% of the nation’s gas supply and 2/3 of all LNG imports are handled by the state-run corporation.

It has two terminals: one in Kochi, Kerala, and the other in Dahej, Gujarat. 17.5 MMTPA is the capacity of the Dahej terminal. The Kochi terminal has a 5 MMTPA capacity.

From Ras Laffan and MARC (Exxon Mobil) in Qatar, the company imports LNG. A group of corporations collectively own the ships that are used to import LNG. Nonetheless, the Shipping Corporation of India manages, runs, and operates them (SCI).

Its principal clients are BPCL, ONGC, IOCL, and GAIL. In order to market RLNG, it entered into gas sales and purchase contracts with major oil and gas behemoths in 2003 and 2010. Also, it has partnered with these businesses to provide regasification services and hydrocarbon processing.

Let’s now examine the PLL company’s operations. Let’s find out more about the gas industry’s landscape in the next part.

Industry Overview

India suffers from a gas shortage, with imports making up the bulk of the nation’s overall gas usage.

Natural gas makes for just 6.7% of India’s energy mix when it comes to the share of energy demand. In spite of this, we were the fourth-largest LNG importer in 2021 with imports totaling 24.02 MT, or 6.5% of the global share.

The national government intends to expand the share of natural gas in India’s electricity basket to 15% by 2030, which bodes well for businesses in this area going forward.

As a result, there is a tremendous opportunity for those in the natural gas industry, as the nation’s domestic gas production is limited. As a result, under government pressure

Due to the fact that the nation’s domestic gas production can only increase to a certain point, this presents a big potential for players in the natural gas industry. Thus, new infrastructure in the form of import terminals, storage facilities, and regasification terminals will be needed due to government pressure and growing demand.

But not all of the government’s efforts will result in industry growth. Many additional pull variables are also in play, including

  1. Expansion of the fertilizer industry because of the Make-in-India initiative (it is a big consumer of natural gas).
  2. City Gas Distribution (CGD) will be more widely distributed, expanding from 88% to 98% of all households in the nation.
  3. It is anticipated that the country’s per capita energy consumption, which is currently just around one-third of the global average, would rise.

In conclusion, the future appears promising for gas companies in India. For gas logistics companies like Petronet LNG, increased imports are probably going to mean higher profits.

Petronet LNG – Financials

revenue and net profit growth

With the exception of FY21 and FY20, the company’s revenue increased during the past six years. With a CAGR of 9.81%, PLL’s operating revenue increased from Rs 24,616 crore in FY17 to Rs 43,169 crore in FY22.

Impressively, during the same period, net profit increased at a pace of 12.20% annually to Rs 3,438 crore.

The operating income and net profit of the PSU are shown in the table below over the previous six fiscal years.

financial year operating revenue Net Profit
2022 43,169 3,438
2021 26,023 2,939
2020 35,452 2,703
2019 38,395 2,231
2018 30,599 2,110
2017 24,616 1,723
6-year CAGR 9.81% 12.20%
(Figures in crores excluding CAGR)

Above, we can see that the company’s earnings rose despite a decline in revenue. How is that possible? This is covered in the section on profit margin that follows.

Operating and Net Profit Margin

As was already mentioned, the company’s main line of business is the import and selling of RLNG. As a result, it represents a significant expense in the P&L statement. Although while revenues decreased during the pandemic’s impact years, margins increased as a result of the company’s ability to purchase goods at lower costs and resell them at market rates.

Also, in FY20, the entire tax expense was lower, which contributed to maintaining profit after tax levels.

We can notice a recent normalization of company margins in the table below, which is similar to the pre-pandemic period.

financial year opm npm
2022 11 8
2021 17 11
2020 10 8
2019 9 6
2018 11 7
2017 11 7
(figure in %)

Return Ratio: ROCE and ROE

Return ratios reveal a company’s profitability or efficiency. PLL is a good firm from an investment standpoint, as seen by the high Return on Capital Employed (ROCE) and Return on Equity (ROE) of 25.65% and 25.15%, respectively.

The return ratio for each of the previous five fiscal years has maintained above 20%, as seen in the graph below.

financial year roce ROE
2022 25.65 25.15
2021 25.12 24.89
2020 21.75 24.30
2019 26.07 21.80
2018 24.97 21.51
(figure in %)

Debt / Equity and Interest Coverage

While operating in a capital-intensive sector, Petronet LNG has had no debt since FY22, maintaining its debt-free status. In FY22, it had an interest coverage ratio of 17.48.

The debt-to-equity ratio and interest coverage ratio for the previous five years are displayed in the table below.

financial year debt equity interest coverage
2022 0.00 17.48
2021 0.01 15.06
2020 0.01 8.87
2019 0.01 33.64
2018 0.07 19.74

Future plans of Petronet LNG

For our preliminary fundamental study of Petronet LNG, we have only examined data from the most recent financial year. We shall make an effort to comprehend the future of the business and its shareholders in this part.

  1. In the next five years, the management has set the bold goal of generating Rs 1 lakh crore in revenue with a PAT of Rs 10,000 crore. It is anticipated that throughout this time it will invest Rs 40,000 crore on this.
  2. PLL is expanding the regas capacity at Dahej from 17.5 MMTPA to 22.5 MMTPA through a brownfield project for Rs 600 crore.
    The company is also building two LNG storage facilities at a cost of Rs 1,250 crore in addition to increasing terminal capacity.
  3. To help satisfy the rising RLNG demand in the nation, it is investing Rs 1,700 crore in the construction of a third dock at Dahej. Both ethane and propane will be able to be handled by the new jetty.
  4. The establishment of LNG storage and regasification terminals on the east coast, compressed bio-gas plants in Haryana and UP, and LNG re-gasification terminals in Bangladesh are other steps PLL is taking to diversify its business operations. These endeavors are in various phases of development.

Key Metrics for Petronet LNG

Our examination of Petronet LNG’s fundamentals is nearly complete. Let’s examine the stock’s important financial indicators.

cmp ₹230 Market Cap (Cr.) ₹34,500
eps ₹22.5 stock p/e 10.1
roce 25.65% ROE 25.15%
promoter holding 50% book value ₹95
debt to equity 0.00 price to book value 2.39
net profit margin 8.8% operating profit margin 11.1%

Conclusion

Our above-mentioned fundamental analysis of Petronet LNG taught us that the company’s profits have been increasing steadily over time. Also, the company has a number of capital expenditure plans in place to grow capacity, so the future seems promising.

Do you think PLL’s present share price accurately reflects its future goals? Or is there significant space for the stock price to increase when the business launches these new initiatives? Exist any potential barriers? How can we continue this discussion in the comments section below?

Also Read: Udayshivakumar Infra IPO opens today. GMP, key details to know

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