Synopsis:
Petronet LNG stock in focus after Motilal Oswal initiated a Buy call with an upside potential of 37% citing a strong competitive edge and tariff issue.
The shares of this LNG importer are in focus after Motilal Oswal initiated a Buy call on this stock with a strong upside potential of 37 percent. In this article, we will dive deep into the details of what led the brokerage to maintain its bullish view.
With a market capitalization of Rs 46,102 crores, the shares of Petronet LNG Ltd are currently trading at Rs 307 per share, down by 20.24 percent from its 52-week high of Rs 384.90 per share. Over the past five years, the stock has delivered a poor return of 17.58 percent.
Leading brokerage house Motilal Oswal has initiated a Buy call on this stock and raised its price target to Rs 410 per share from Rs 315 per share earlier, signaling an upside potential of 37 percent from its previous closing price of Rs 299.75 per share.
It cited that the current market scenario is reflecting uncertainty. The market appears to expect a steep 20 percent cut in tariffs at both the Dahej and Kochi terminals in FY28, no future tariff increases, and no growth in volume.
Motilal believes this outlook is too harsh. Although there are worries about competition, the utilization at rival terminals is still low, and Petronet has strong advantages, including better scale, lower past capital expenses, and improved connectivity.
Even if a tariff cut occurs, Dahej’s lower construction cost (Rs 500 crore per mmtpa compared to Rs 900–1,100 crore for others) makes it more competitive. Additionally, the Dahej terminal is set to increase its capacity by 5 mmtpa (over 18 percent) by December 2025, which supports a projected 3.3 percent volume growth rate from FY25 to FY28.
The Kochi terminal should also gain from the completion of the Kochi-Mangalore-Bangalore pipeline by the end of 2025.In the future, declining LNG prices and a positive outlook for crude oil are expected to encourage volume growth starting in FY27.
Financial Highlights
The company reported a revenue of Rs 50,982 crores in FY25, down by 3.31 percent from its FY24 revenue of Rs 52,729 crores. However, the company reported a net profit increase of 9 percent to Rs 3,973 crore in FY25 from Rs 3,652 crores in FY24.
The stock delivered an ROE and ROCE of 21.31 percent and 25.57 percent respectively, and is currently trading at a P/E of 11.64x as compared to its industry average of 21.68x.
Petronet LNG Limited imports, stores, regasifies, and supplies liquefied natural gas (LNG) in India. The company serves a diverse group of clients, including oil and gas companies, petrochemical firms, city gas distributors, refineries, fertilizer producers, power plants, and other industrial users.
Written by Satyajeet Mukherjee
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