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Friday, November 4, 2011

Petronet LNG Limited

Petronet LNG Limited
Company profile
Petronet LNG is a joint venture company promoted by India’s leading upstream and downstream companies’ viz. ONGC, GAIL, IOCL and BPCL.
LNG Petronet imports and re-gasifies LNG and transports the LNG to the end-users.
Company’s LNG import and re-gasification terminals
1.      Dahej LNG Terminal
·         Dahej LNG terminal is of 10 MMTPA capacity
·         Terminal comprises 2.5 km jetty with unloading facility, 4 LNG storage tanks, re-gas facility and truck loading facility
·         7.5 MMTPA gas is sourced through long term contract with RasGas Qatar
·         Second LNG jetty by the year 2013 Q3
·         Terminal is in proximity to HBJ (Hazira, Beejapur, and Jagdispur) pipeline which is owned and operated by one of its promoter GAIL.
·         Plant is in the vicinity of natural gas consuming industries
·         RasaGas, State of Qatar, with proven natural gas reserves of 900 million cubic feet ,is the major supplier of the natural gas

2.      Kochi LNG terminal
·         Upcoming LNG terminal of 5 MMTPA capacity by the year2012 Q3
·         Created in new SEZ as a co developer
·         Tied up 1.44 MMTPA LNG from Exxon Mobil’s Gorgon venture Australia
·         Shall become operative from 2012 Q3
Petronet LNG has signed a GSPA (Gas Sell Purchase Agreement) with GAIL, IOC and BPCL for the supply of re-gasified LNG in the proportion of 60:30:10.
Industry overview
 LNG (Liquefied Natural Gas)
Natural gas mainly consists of methane and small quantity of ethane, propane and butane. LNG gas is extracted and then purified gas is transported for the liquefaction process through pipelines, where it is cooled to -161 degree centigrade. Liquefied LNG reduces in volume and can be easily transported further either in large containers or pipelines to the end users.
The reason for the liquefaction are-(1) liquid travels much faster in pipelines than the gas
(2) Natural gas is too bulky while LNG requires relatively much lower space for the storage
Liquefied gas when heated turns into the natural gas.
 LNG Cycle

Demand of LNG in Forthcoming Years

Application of LNG
·         It is cheaper than LPG and can be used as piped-gas in households for domestic cooking purposes. LNG is clean, efficient, flexible and eco friendly.
·         In Electricity generation, as base fuel in power plants. LNG enjoys an edge over other substitutes –coal produces pollution, naphtha is much expensive than the LNG
·         Industrial boiler fuel and other heating purposes
·         As Automobile fuel it is 30-40% cleaner and more efficient than the fossil fuel
·         As a feed stock in the manufacturing of the Petrochemicals
·         In cement plants for running gas fired boilers
·         In fertilizer plants as a feedstock
·         In petrochemical plants as a feedstock
Future of LNG in India

India has got just .4 % of the world’s gas reserves. In India, Presently LNG production is dominated by 2 public sector companies – (1) ONGC (2) Oil India, both companies combined produce 85% of the indigenous LNG production. India 70% of natural gas reserves of   the country are in Mumbai High basin and Gujarat.
Thus it is clear that demand of imported LNG shall increase in future by leaps and bounds.
Financial Analysis

Financial Ratios at Glance #


Parameter
Value
Price to earnings ratio (P/E)
5.98
Price to book value ratio (P/B)
1.95
Return on equity (ROE)
32.6%
Return on capital Employed (ROCE)
25.2%
Debt to Equity ratio
1.09
Interest cover
9.21
Profit CAGR (FY08-12)
21.7%
PEG ratio
.3
Net Profit Margin (NPM)
4.85%
Current ratio
1.67
M-cap/sales ratio
.29


#
·         Annualized FY 12 Q2 data is used
·         All calculations at the CMP of 166.2 Rs.
Risk factors
·        Such businesses are prone to natural and other calamities.
·        RasaGas happens to be the only prominent gas supplier
·        Company has very few dedicated customers like GAIL,IOC & BPCL
Inference
The company is treading on the ‘slow and steady’ track and has got a huge potential to grow provided uncalled events like natural and other calamities don’t turn up. In future, there shall be huge demand for cleaner fuel and the demand for LNG shall be multiplied many times.
Company shall be benefited when Kochi terminal shall become operative.
Power plants, fertilizer plants or cement plants, LNG is required. The concept of piped gas for the domestic and industrial use is also picking up in the country. Fundamental of the company too are satisfactory. Though Company operates on low profit margin, but in future it is expected to improve.
LNG Petronet could be a good pick, and in forthcoming years it is supposed to give handsome returns.
Disclaimer
Analysis is for the information purpose only. Though due diligence has been taken while preparing this report, analyst shall not be responsible for any error and shall not bear any financial liability to the users of this report.

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