1QFY2012 Result Update | Oil & Gas

July 20, 2011

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

NEUTRAL
CMP Target Price
1QFY11 2,526 248 9.8 111 % chg (yoy) 83.0 76.9 (33)bp 130.5 4QFY11 % chg (qoq) 3,941 351 8.9 206 17.3 24.7 56bp 24.4

`153 -

1QFY12 4,623 438 9.5 257

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

Oil & Gas 11,486 0.9 153/81 481859 10 18,502 5,567 PLNG.BO PLNG@IN

Petronet LNGs (PLNG) 1QFY2012 net sales increased by 83.0% yoy to `4,623cr on the back of higher volumes and improved realisation. Net profit increased by 130.5% yoy to `257cr. We remain Neutral on the stock. Robust volume growth and price increases drive sales growth: PLNGs R-LNG increased by 39.6% yoy to 133.4TBTU mainly on account of higher spot and contracted volumes. Contractual volumes were higher on a yoy basis at 105.8TBTUs in 1QFY2012 as against 89.5TBTUs in 1QFY2011. The companys utilisation reached 105% at its Dahej terminal during 1QFY2012. Also, average realisations improved by 32.0% yoy to `348/mmbtu. Hence, the companys net sales increased by 83.0% yoy to `4,623cr. Strong growth in EBITDA and net profit: EBITDA/mmbtu increased to `33.0 (+26.9% yoy) mainly on account of increased spot volumes, which have higher margins compared to contracted volumes. However, EBITDA margin declined marginally by 33bp yoy to 9.5% in 1QFY2012. EBITDA increased by 76.9% yoy to `438cr. Other income increased by 108.5% yoy to `26cr. Thus, net profit grew massively by 130.5% yoy to `257cr. Outlook and valuation: For 1QFY2012, PLNG reported strong revenue and profit growth. However, the companys capacity utilisation (105%) almost peaked in 1QFY2012, indicating a further increase in volume growth will remain capped in the near term. Nevertheless, demand for natural gas remains robust in India, while the 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 12.6x FY2012E and 11.5x FY2013E EPS. Hence, 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 9.2 12.4 28.4

Abs. (%) Sensex PLNG

3m (5.0) 17.1

1yr 3.5

3yr 33.6

80.2 178.7

FY2010 10,649 26.3 404 (22.0) 5.4 7.9 28.4 5.1 19.2 14.3 1.2 15.5

FY2011 13,133 23.3 555 37.3 8.3 8.8 18.5 4.3 25.2 18.2 1.0 11.0

FY2012E 19,048 45.0 911 64.0 12.1 9.1 12.6 3.4 29.8 22.5 0.7 7.9

FY2013E 25,001 31.3 994 9.2 13.3 8.0 11.5 2.7 26.0 21.1 0.5 6.8

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

Please refer to important disclosures at the end of this report

Petronet LNG | 1QFY2012 Result Update

Exhibit 1: 4QFY2011 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

1QFY2012 4,623 4,133 89.4 52 1.1 4,185 90.5 438 9.5 46 46 26 372 8.1 116 31.0 257 5.6

1QFY2011 2,526 2,233 88.4 45 1.8 2,278 90.2 18 248 9.8 50 46 13 164 6.5 53 32.2 111 4.4

% chg 83.0 85.1 15.9 83.7

FY2011 13,133 11,801 89.9 180 1.4 11,981 91.2 64.4

FY2010 10,603 9,665 91.2 138 1.3 9,803 92.5 46.2 846 8.0 184 161 98 599 5.7 195 32.5 404 3.8

% chg 23.9 22.1 30.4 22.2 39.4 43.7 5.0 14.8 (30.5) 51.2 47.1 53.2

76.9 (6.9) (0.7) 108.5 126.4 117.9 130.5

1,216 9.3 193 185 68 906 6.9 287 31.6 620 4.7

Strong volume growth and higher realisation drive net sales growth
PLNGs R-LNG increased by 39.6% yoy to 133.4TBTU mainly on account of increased spot and contracted volumes. Contractual volumes were higher on a yoy basis at 105.8TBTUs in 1QFY2012 as against 89.5TBTUs in 1QFY2011. The companys utilisation reached 105% at its Dahej terminal during 1QFY2012. Also, average realisations improved by 32.0% yoy to `348/mmbtu. On account of these, the companys net sales increased by 83.0% yoy to `4,623cr.

Exhibit 2: Sales volume trend

120 100 80 60 40 20 0

Exhibit 3: Net sales growth trend

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 40 30 20 10 -10 -20 -30 -40

(` cr)

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

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

1QFY12

July 20, 2011

(%)

Petronet LNG | 1QFY2012 Result Update

Strong growth in EBITDA and net profit

EBITDA/mmbtu increased to `33.0 (+26.9% yoy) mainly on account of increased spot volumes, which have higher margins compared to contracted volumes. However, EBITDA margin declined marginally by 33bp yoy to 9.5% in 1QFY2012. EBITDA increased by 76.9% yoy to `438cr. Other income increased by 108.5% yoy to `26cr. Thus, net profit grew massively by 130.5% yoy to `257cr.

Exhibit 4: EBITDA and EBITDA margin trend

500 450 400 350 300 250 200 150 100 50 0 12 10 8

Exhibit 5: Net profit and net margin trend

300 250 200 6 5 4

(` cr)

(` cr)

(%)

6 4 2 0

100 50 0

2 1 0

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

EBITDA (LHS)

EBITDA margin (RHS)

1QFY12

Net profit (LHS)

Net margin (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

PLNG plans newer greenfield and brownfield projects

PLNG board has approved to increase Dahej capacity to 15mn tonnes by CY2015 at a capex of `2,250cr. The equity for the project would be funded by offtakers (GAIL and GSPC) as advance for re-gasification charges. Further, PLNG will conduct a feasibility study to build a 5mn tonne LNG terminal in the east coast.

1QFY12

July 20, 2011

(%)

150

Petronet LNG | 1QFY2012 Result Update

Investment arguments
Capacity additions to drive volume growth: PLNG plans to double its capacity at the Kochi terminal to 5mn tonnes by December 2012, while its phase-3 expansion at Dahej terminal will take its capacity to 15mn tonnes by CY2015. 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 1QFY2012, PLNG reported strong revenue and profit growth. However, the companys capacity utilisation (105%) almost peaked in 1QFY2012, 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 12.6x FY2012E and 11.5x FY2013E EPS. Hence, we maintain our Neutral view on the stock.

Exhibit 6: Angel EPS forecast vs. consensus

Angel forecast Bloomberg consensus Variation (%) FY2012E FY2013E
Source: Company, Angel Research

12.1 13.3

10.3 11.0

17.9 20.5

Exhibit 7: Recommendation summary

Companies Reco. CMP (`) Ind. Gas GSPL Gujarat Gas Petronet LNG Neutral Accumulate Neutral Neutral 388 96 409 153 TP (`) 105 Mcap Upside (` cr) 5,433 5,421 5,249 11,486 P/E (x) P/BV (x) EV/EBITDA (x) RoE (%) RoCE (%) (%) FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E 9 18.6 10.5 19.6 12.6 17.1 10.2 17.6 11.5 4.5 2.3 5.5 3.4 3.7 1.9 4.7 2.7 9.9 6.7 10.6 7.9 8.9 6.4 9.4 6.8 26.3 23.3 29.7 29.8 23.8 20.0 28.8 26.0 29.1 21.6 31.9 22.5 28.5 19.7 31.5 21.1

Source: Company, Angel Research

July 20, 2011

July 20, 2011

(`)
50 0 100 150 200 250 300 Price 5x 10x 15x 20x 25x

Exhibit 8: One-year forward P/E

Source: Company, Angel Research

Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

Petronet LNG | 1QFY2012 Result Update

Petronet LNG | 1QFY2012 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& Amortisation 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 19,048 45.0 17,309 17,096 34 179 1,739 51.0 9.1 193 1,546 59.8 8.1 322 105 7.9 1,329 57.9 1,329 419 31.5 911 911 911 64.0 4.8 12.1 12.1 47.0 FY13E 25,001 31.3 23,003 22,750 38 215 1,997 14.8 8.0 286 1,711 10.7 6.8 370 110 7.6 1,451 9.2 1,451 457 31.5 994 994 994 9.2 4.0 13.3 13.3 9.2

July 20, 2011

Petronet LNG | 1QFY2012 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 1,045 2,709 3,203 1,165 2,073 213 138 1,722 1,677 396 7,473 6,354 1,331 5,023 1,403 1,165 3,307 908 138 2,260 2,173 1,134 8,725 750 869 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 2,672 3,422 3,703 348 7,473 750 3,489 4,239 4,138 348 8,725 FY08 FY09 FY10 FY11 FY12E FY13E

July 20, 2011

Petronet LNG | 1QFY2012 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) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY08 715 102 159 (50) (169) 757 (604) (261) 41 (823) 194 (110) 85 18 340 359 FY09 774 103 (338) (73) (266) 199 (788) 246 69 (473) 704 (132) 572 299 359 658 FY10 599 161 303 (45) (164) 854 (1,047) (234) 45 (1,236) 218 (154) 65 (317) 658 340 FY11 906 185 (108) (25) (218) 741 (889) (626) 39 (1,477) 716 (131) 585 (151) 340 154 FY12E 1,329 193 (163) (419) 941 (1,200) (1,200) 487 (169) 318 59 154 213 FY13E 1,451 286 (42) (457) 1,238 (800) (800) 435 (177) 258 695 213 908

July 20, 2011

Petronet LNG | 1QFY2012 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 0.7 1.3 4.8 0.5 1.0 4.6 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 2.2 5.2 8.4 18.6 26.7 1.9 4.9 10.6 18.5 27.7 1.3 24.0 46.3 32.8 20.0 49.5 28.8 14.3 29.9 19.2 18.2 36.9 25.2 22.5 55.1 29.8 21.1 59.2 26.0 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 0.9 23.3 8.1 68.5 3.5 19.2 6.4 0.4 24.1 6.8 68.5 8.2 38.5 6.5 0.3 47.1 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 12.1 12.1 14.7 1.9 45.6 13.3 13.3 17.1 2.0 56.5 24.2 19.9 7.1 1.0 1.9 14.0 3.5 22.1 18.5 5.8 1.1 1.5 14.2 2.8 28.4 20.3 5.1 1.1 1.2 15.5 2.6 18.5 14.3 4.3 1.2 1.0 11.0 2.1 12.6 10.4 3.4 1.3 0.7 7.9 1.8 11.5 9.0 2.7 1.3 0.5 6.8 1.6 FY08 FY09 FY10 FY11 FY12E FY13E

July 20, 2011

Petronet LNG | 1QFY2012 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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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%)

July 20, 2011

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