Petronet LNG third-party cargoes cushion Dahej utilisation amid Qatar supply disruption

Investment View and Key Thesis

Motilal Oswal Financial Services retains its Buy view on Petronet LNG following its August 13, 2026 1QFY27 result update. The broker's central thesis is that third-party cargoes and service volumes have cushioned the impact of the Qatar force majeure on Dahej terminal utilisation. Tied-up cargoes, Kochi connectivity and the petrochemical project remain important operating monitorables and potential future drivers.

1QFY27 Financial Performance

Petronet LNG reported 1QFY27 EBITDA of Rs 1,530 crore, up 32 per cent year on year and 18 per cent above Motilal Oswal's estimate. The beat was driven by higher-than-expected inventory gains of Rs 190 crore and trading gains of Rs 310 crore. The company also booked additional use-or-pay, or UoP, provisioning of Rs 42 crore and waivers of Rs 58.8 crore during the quarter.

After adjusting for the UoP provisioning and waiver, EBITDA would have been 25 per cent above the broker's estimate. Reported PAT was Rs 1,130 crore, up 33.2 per cent year on year and 28 per cent above the broker's estimate. Adjusted for UoP provisioning, waivers and recovery impact, PAT would have been 40 per cent above estimate.

Operating Volumes and Terminal Utilisation

Operating volumes were a relative weak point. Total throughput was 207 TBtu, 7 per cent below Motilal Oswal's estimate. Dahej volumes were 192 TBtu, down 7 per cent year on year, although Dahej utilisation remained healthy at 68 per cent, 300 basis points above the broker's estimate. Kochi utilisation was 24 per cent, 600 basis points below estimate.

Motilal Oswal viewed the strong service volumes as a positive, as they offset softer long-term volumes at Dahej despite the Qatar disruption. Management expects this service-volume trend to persist into 2QFY27, supporting capacity utilisation.

Growth Drivers and Management Commentary

• Tied-up cargo flows: Deepak Fertilisers brought two cargoes in 2QFY27 under a contract that commenced in May 2026. Exxon has also started bringing cargoes to Kochi.
• Petrochemical complex: The project was 40 per cent complete at the end of 1QFY27, with Rs 470 crore of capex incurred during the quarter. Management indicated that the project remained on track without delays.
• Kochi connectivity: Mechanical completion of the Kochi terminal pipeline connectivity is expected by the end of 2QFY27. The subsequent pace of volume ramp-up is a key item for investors to watch.

Key Risks and Monitorables

• Approximately 7.5 million metric tonnes per annum of Qatari volumes are expected to remain unavailable while the conflict continues, which could sharply reduce utilisation.
• Continuing UoP write-offs and waivers could weigh on performance.
• The terms of a new Qatar Energy contract, which may be formalised over the next two to three quarters, remain a key monitorable.

As of June 2026, UoP provisions stood at Rs 350 crore. UoP dues of Rs 660 crore, net of provisions of Rs 310 crore, were included in trade receivables. Management is confident of recovery, supported partly by bank guarantees, although some customers have not provided balance confirmations.

Earnings Forecasts and Valuation

Motilal Oswal forecasts FY27E EBITDA of Rs 5,330 crore and adjusted PAT of Rs 3,580 crore, followed by FY28E EBITDA of Rs 6,020 crore and adjusted PAT of Rs 3,740 crore.

The Rs 362 target price is based on DCF valuation using an 11.5 per cent weighted average cost of capital and 2 per cent terminal growth. The valuation assumes a 5 per cent Dahej tariff cut in FY28, followed by 4 per cent tariff increases for both terminals, and includes the full petrochemical capex. The petrochemical complex is valued conservatively at 0.5 times FY29E price-to-book and discounted back to FY27.

At the report CMP of Rs 277, the broker viewed the stock as inexpensive at 11.6 times FY27E price-to-earnings and at about a 3.4 per cent dividend yield.