Emkay Global Financial has issued a bullish recommendation on Petronet LNG (PLNG), upgrading the stock to a 'Buy' rating with a revised target price of ₹425 per share. This upgrade comes as part of their research report published on October 2, 2024. The firm increased the target price by 16%, citing strong fundamentals and a positive outlook for the company.
Q1 Performance and Future Outlook
In the first quarter of FY24, Petronet LNG saw high utilization rates at its Dahej terminal, primarily driven by the power sector. Although this demand has now normalized, Emkay Global is optimistic that the company can achieve nearly 100% utilization for the remainder of the fiscal year.
The commencement and eventual ramp-up of Exxon's second 1.2 mmtpa term contract, coupled with higher tariffs at the Kochi terminal, are expected to increase Petronet's earnings by 7-9% in FY26-27. Despite concerns over the QatarGas contract renewal in 2028 and potential tariff adjustments, the management has reassured that any rate reductions will be minimal, ensuring that minority shareholder interests are protected.
Valuation and Recommendation
Emkay Global has shifted its valuation method for Petronet LNG, now basing it on 15x the estimated earnings per share for September 2026 (EPS), as opposed to their earlier discounted cash flow (DCF) model. Despite uncertainties, the report emphasizes that there is still significant value in the stock, given the company's strong financial outlook and steady performance.
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