Finance1 min read

Petronet LNG’s inventory boost is not enough to sustain earnings growth

By · Published by Everything Blog

In short

Strong demand from fertilizer and city gas distribution pushed total processed gas volumes to 231 trillion British thermal units during the quarter. To replace supply drops from Qatar and the UAE, the company secured alternative imports from the US, Oman, and African nations. However, revenue fell by 35% as the business handled more tolling services, leaving overall profitability exposed to volatile trading gains. Sustained capacity growth also remains tied to the delayed completion of the Kochi-Bengaluru pipeline, now scheduled for the end of FY27.

Key points

  • The Dahej terminal operated at 94% capacity, whereas the Kochi terminal remained underuti…: The Dahej terminal operated at 94% capacity, whereas the Kochi terminal remained underutilized at 23% due to local pipeline delays.
  • Alternative supplies from the US, Oman, and Africa successfully countered regional delive…: Alternative supplies from the US, Oman, and Africa successfully countered regional delivery disruptions from Qatar and the UAE.
  • Future financial performance faces headwinds from volatile trading profits, prolonged sup…: Future financial performance faces headwinds from volatile trading profits, prolonged supplier force majeure events, and slow bookings at expanded facilities.

Sources checked by our analysis pipeline: 1

Petronet LNG’s September quarter (Q2FY27) results were decent despite supply disruptions amid the West Asia war. Ebitda surged 49% year-on-year (y-o-y) to ₹1,663 crore (excluding one-offs), beating consensus estimates by 10%, driven by better-than-expected volumes and a favourable mix of higher spot LNG sales.

Both revenue and profit after tax beat consensus estimates. However, revenue fell 35% y-o-y to ₹7,200 crore, weighed by a change in volume mix: lower sales of contracted natural gas and higher volumes handled through tolling arrangements.

Under the former, Petronet procures LNG and sells the regasified gas to customers, with the entire sale value booked as revenue. Under the latter, customers procure LNG themselves and pay only regasification charges for using Petronet’s LNG terminal.

Inventory boost

Profitability got a leg-up from operational and commercial efficiencies, primarily trading and inventory gains of ₹668 crore in Q2FY27, compared with ₹41 crore a year ago, the management said. Antique Stock Broking notes that core Ebitda, excluding these gains, fell 8% y-o-y to ₹1,130 crore.

Petronet benefited from a recovery in demand in Q2FY27 despite higher prices, led primarily…

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