Over the past decade, India’s LNG imports have risen by ~13.7 mmt, with LNG now accounting for nearly 50% of the country’s total gas consumption (vs. 35% in FY15). However, with limited regasification capacity additions of just 7.5 mmtpa (entirely at Dahej), Petronet LNG’s market share in India’s LNG imports slipped to 69% in FY25 from 78% in FY15. With the upcoming 5mmtpa Dahej expansion (commissioning by Dec’25), the company is strategically positioned to capture the next leg of India’s LNG import growth.
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Motilal Oswal Report
Petronet LNG Ltd. trades at 8.9x FY27E earnings per share compared to its historical one-year forward P/E of 10.4x. Our DCF-based target price (weighted average cost of capital: 10.5%, TG = 2%) assumes a 10% tariff cut in FY28, followed by a 4% increase for both the terminals.
While we have incorporated the full capex for the petchem plant, we value it conservatively at 0.5x FY29E price/book and discount this back to FY27E.
In an extreme bear-case DCF scenario, we assume 0% terminal growth and no tariff hike after a 20% cut in FY28, implying a valuation of Rs 274/share.
At 8.9x FY27E P/E and a ~4.3% dividend yield, we believe valuations are at the rock bottom. Reiterate Buy with a DCF-based target price of Rs 410.
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