Results Review for Petronet LNG, Metro Brands, and Ashoka Buildcon

  • Stock Market Analysis
  • Editors Pick

Petronet LNG (NS: PLNG ): Our REDUCE recommendation on Petronet LNG (PLNG) with a TP of INR 265 is based on: (1) limited visibility of near-term earnings growth, (2) an increased capex outlook, and (3) subdued return ratios resulting from a high capex cycle anticipated over the next five years. In Q4, the reported EBITDA stood at INR 11bn (+17% YoY, -35% QoQ) while PAT came in at INR 7.4bn (+20% YoY, -38% QoQ), below our estimates. The miss was on account of lower-than-expected volumes and marketing margins. Volumes were at 234tbtu (+26% YoY, +1% QoQ), below expectation.

Metro Brands (NS: METB ): Revenue grew 7.1% YoY (on a high base) to INR 5.83bn (HSIE: INR 5.99bn). Products > INR 3,000 accounted for 50% of the mix in FY24 vs. 44% in FY23. KPI (sales density, margins) normalization continues, as MBL dealt with tough comparables (vs base). Q4FY24 GM/EBITDAM expanded 52/83bps YoY to 56.4/26.9% (HSIE: 55.5/27%), led by a favorable mix and operating efficiencies. FILA’s inventory liquidation exercise is delayed and likely to be executed by Q2FY25 EoSS. MBL targets to add 225 stores (ex-FILA) over the next two years. We largely maintain our FY25/26 EPS estimates and our SELL rating on the stock, with a DCF-based TP of INR870/sh, implying 46x FY26E P/E.

Ashoka Buildcon (NS: ABDL ): Ashoka Buildcon (ASBL) reported revenue/EBITDA/APAT at INR 24.9/1.9/0.95bn, a beat/(miss) of 10/(10.4)/(12.8)%. EBITDA margin: 7.4% (+9/-84bps YoY/QoQ), lower than our estimate of 9.3%, owing to weak margins in legacy projects. ASBL expects to record double-digit EBITDA margins from H2FY25 on the back of new order execution. The OB as of Mar’24 stood at INR 116.9bn (~1.5x FY24 revenue). Furthermore, ASBL has guided for an order inflow of INR 150bn for FY25, largely expected post-elections. The standalone gross/net debt as of Mar’24 stood at INR 11.4/9.3bn vs. INR 11.2/8.3bn as of Dec’23. The company has given the FY25 revenue growth guidance of 15% YoY. Given a truncated ordering period owing to elections and weaker-than-expected NHAI ordering, it expects bid momentum to restart from Q2FY25. Given the stable OB, improving visibility on asset monetization, and margin expansions on the back of new order execution, we maintain BUY. However, we marginally trim the SOTP TP to INR 242/sh (11x Mar-26E EPS, HAM assets 1.4x P/BV).

Petronet LNG

Muted Earnings

Our REDUCE recommendation on Petronet LNG (PLNG) with a TP of INR 265 is based on: (1) limited visibility of near-term earnings growth, (2) an increased capex outlook, and (3) subdued return ratios resulting from a high capex cycle anticipated over the next five years. In Q4, the reported EBITDA stood at INR 11bn (+17% YoY, -35% QoQ) while PAT came in at INR 7.4bn (+20% YoY, -38% QoQ), below our estimates. The miss was on account of lower-than-expected volumes and marketing margins. Volumes were at 234tbtu (+26% YoY, +1% QoQ), below expectation.

Financial performance: The reported EBITDA/PAT stood at INR 11/7.4bn, which came in below our estimate. Earnings came in lower due to lower-than-expected volumes at 234tbtu (+26% YoY, +1% QoQ). Lower-than-expected marketing margins of -USD 1.1/mmbtu and an inventory loss of INR 1.1bn also impacted earnings. Trading gains for the quarter were at INR 140mn. Other expenses stood at INR 2bn (-22% YoY, -45% QoQ). Other income came in at INR 1.6bn (+2% YoY, flat QoQ) while interest cost was at INR 708mn (- 22% YoY, +2 QoQ).

Terminal-wise Q4 performance: Utilisation at Dahej terminal was at 98.2% while that at Kochi was at 23.5%. Volumes at Dahej and Kochi were 219tbtu and 15tbtu, with total volume at 234tbtu (+26% YoY, +1% QoQ).

Con call takeaways: (1) The management is confident of recovering the Use or Pay charges, either by bringing in additional volumes over and above the contracted volume or by encashing their bank guarantees. (2) The company’s ongoing projects are progressing well, as planned – the Dahej expansion from 17.5mtpa to 22.5mtpa is expected to be completed by Mar 2025; tanks should be commissioned by next month; the jetty will be completed over the next three years. Gopalpur terminal would take three years to complete after the project is approved. (3) The company has ~INR 74bn cash on their books which should support their high capex plans going ahead. (4) PLNG has recommended a final dividend of INR 3/sh, in addition to an interim dividend of INR 7/sh, implying a dividend payout of ~42% for FY24.

Change in estimates: We have increased our FY25/26 EPS estimates by 2.5/9.2% to INR 22.9/26.1 per share to factor in higher volumes, lower other expenses and depreciation and higher other income. We also roll forward our DCF-based valuations to FY26, delivering a revised target price of INR 265/sh.

DCF valuation: Our TP of INR 265 is based on the Mar-26E cash flow (WACC 12%, terminal growth rate 3%). The stock is trading at 11.8x Mar- 26E EPS.

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