Broker Call: BRICS PCG puts Buy on Petronet

Brics PCG recommends a "Buy" on Petronet LNG. The report states that the company posted an 80% year-on-year acceleration in net sales to Rs 940 crore for the March FY06 quarter.

However, this figure was 8.5% less quarter-on-quarter due to lower volumes of gas sold. Net profit rose 33.3% quarter-on-quarter to Rs 66.2 crore. Operating profit rose 19.4% quarter-on-quarter to Rs 150 crore. Operating margin this quarter was 15.43%, up from 11.8% in Q3 FY06.

Going forward, natural gas prices would serve as a benchmark. During the year, the YK Alagh working group on pricing of controlled fertiliser urea had recommended that the prices of GAIL and Petronet LNG in respect of natural gas and regasified LNG (R-LNG) be accepted as benchmarks for the pricing of these commodities.

Petronet LNG is keen to enter into a long-term contract with North West Shelf (NWS) of Australia for the supply of LNG. NWS had quoted a price of about $ seven per mbtu (million British thermal unit).

Petronet LNG has also held discussions with LNG suppliers from Oman, Qatar and Malaysia. Oman LNG has already assured the company a supply of 0.6-0.8 million tonnes of LNG in 2006, 1.0-1.2 MT for 2007 and 1.6-1.8 MT annually from 2008.