Petronet Q2: Analysts upbeat on long-term outlook despite FX loss, UoP hit

On the bourses around 10:15 AM, Petronet LNG shares were struggling as the scrip was trading 1.31% lower at ₹273.95. In comparison, BSE Sensex was trading 0.29% lower at 83,289.99 levels.

Petronet LNG Q2 review: State-owned oil and gas company Petronet LNG Limited’s September quarter (Q2FY26) results drew a mixed response from analysts, who noted steady operational performance but weaker earnings due to foreign exchange losses and Use-or-Pay (UoP) provisions. 

 

While most brokerages cut near-term earnings estimates, they maintained a broadly positive outlook amid upcoming capacity expansions and volume recovery from Kochi.

 

However, on the bourses around 10:15 AM, Petronet LNG shares were struggling as the scrip was trading 1.31 per cent lower at ₹273.95 per share. In comparison, BSE Sensex was trading 0.29 per cent lower at 83,289.99 levels.

 

Nomura: Maintain Buy; TP trimmed to ₹360

 

Nomura said Petronet’s Q2FY26 earnings were hit by forex losses and UoP-related provisions, though operational trends remained resilient. Ebitda fell 2 per cent sequentially to ₹1,270 crore, about 4 per cent below estimates, as other expenses surged 72 per cent quarter-on-quarter (Q-o-Q) to ₹220 crore due to an FX loss of ₹84 crore.

 

Volumes improved 4 per cent Q-o-Q but were still 5 per cent lower year-on-year (Y-o-Y) amid high gas prices and extended monsoon impact. Dahej terminal utilisation stayed robust at 92.9 per cent, while Kochi saw its highest-ever throughput at 17 TBTU, aided by BPCL’s cargoes.

 

The brokerage noted that Petronet booked a ₹157 crore provision for UoP dues and expects a large reversal of around ₹550-600 crore in Q4FY26. Adjusted profit stood at ₹920 crore, down 3 per cent Q-o-Q.

 

Management reaffirmed progress on key projects: the Dahej expansion (+5 MTPA) and Bengaluru-Kochi pipeline are likely to be commissioned by end-FY26; capex for FY26 is pegged at ₹5,000 crore, mainly for the upcoming petrochemical plant. The 5 MTPA Gopalpur terminal remains under environmental clearance, with a three-year commissioning timeline post-approval.

 

Nomura cut its FY26F/27F Ebitda estimates by 5 per cent/4 per cent, trimming its target price to ₹360 (from ₹370). Despite short-term pressures, it said Petronet’s fundamentals remain strong, supported by capacity additions and steady gas demand. At 9.2x FY27F P/E, valuations remain attractive.  CATCH STOCK MARKET LIVE UPDATES TODAY

Nuvama: Retain Buy; TP cut to ₹339

 

Analysts at Nuvama said Petronet’s growth projects are on track, with Dahej expansion and the Gopalpur terminal progressing well and the PDH-PP petrochemical project’s commissioning likely to accelerate.

 

Q2 Ebitda fell 7 per cent Y-o-Y, broadly in line with expectations, as a 3 per cent volume beat offset higher operating costs. Gross profit exceeded estimates by 2 per cent. Overall volumes declined 5 per cent Y-o-Y – an improvement over the 16 per cent drop in Q1 – on lower third-party and nil spot volumes.

 

Nuvama retained its ‘Buy’ rating, citing strong cash flows, 19 per cent return on equity (RoE), and a net cash balance sheet. However, it reduced its target price to ₹339 (from ₹373), factoring in softer near-term earnings.

 

Motilal Oswal: Buy; TP ₹390

 

Those at Motilal Oswal said Petronet LNG’s Q2 performance was largely in line with expectations, with revenue of ₹11,000 crore and Ebitda of ₹1,120 crore. Adjusted for UoP provisioning and waiver, Ebitda was 10 per cent above estimates, while PAT of ₹810 crore was aided by higher other income.

 

Volumes came in at 228 TBTU, matching forecasts, with Dahej utilisation steady and Kochi outperforming expectations by 12 per cent. The brokerage highlighted that spot LNG prices softened to $11.8/mmbtu from $12.4 in the previous quarter.

 

It noted a three-month delay in Dahej’s expansion (now expected by March 2026), leading to a 9 per cent cut in FY26 PAT estimates. Despite this, Motilal Oswal reiterated its ‘Buy’ rating with a DCF-based target of ₹390 on the back of attractive valuations at 8.9x FY27E P/E and a 4.3 per cent dividend yield.

 

PL Capital: Hold; TP ₹290

 

Analysts at PL Capital remained cautious despite steady operations, maintaining a ‘Hold’ rating with a TP of ₹290. It said Q2 standalone Ebitda of ₹1,120 crore was 31.5 per cent below its estimate due to impairment charges and higher lease-related expenses.

 

PAT fell 5 per cent Q-o-Q to ₹810 crore, while H1FY26 Ebitda and PAT dropped 18 per cent and 17 per cent Y-o-Y, respectively. The brokerage noted that Petronet’s ₹5,000 crore FY26 capex plan could be return on capital employed (ROCE)-dilutive in the near term, as large spends are directed toward long-gestation projects.

 

While management expects recovery of UoP dues, PL Capital flagged risks of further waivers. It values the stock at 9x FY27/28E EPS, suggesting limited near-term upside.

 

That said, analysts broadly remain constructive on Petronet LNG, viewing near-term earnings pressure as transitory. Upcoming capacity additions at Dahej and Kochi, along with steady LNG demand, are seen as key growth drivers.