Petronet LNG expands Kochi services as Dahej projects support future growth

Investment View and Valuation

Prabhudas Lilladher’s September 26, 2026 management-meet update on Petronet LNG retains an ACCUMULATE rating and raises the target price to Rs302 from Rs297. The target is based on 10 times FY28E EPS of Rs30.2.

The broker’s thesis centres on Petronet LNG expanding services at Kochi to improve terminal utilisation, alongside longer-term growth projects at Dahej. Prabhudas Lilladher has retained FY27E EPS at Rs25.7 and raised FY28E EPS by 1.7 per cent to Rs30.2.

Kochi: Expanding Services to Improve Utilisation

Kochi is a key focus because current utilisation at the 5 mmtpa terminal is about 25 per cent. Petronet LNG is broadening the offering beyond regasification through Gassing-Up and Cooling-Down (GUCD), LNG reloading and LNG bunkering.

The company completed three GUCD operations in June 2026, each in about 1 to 1.5 days, compared with the historical 3 to 4 days required per vessel. Management stated that this turnaround is comparable with Singapore. However, GUCD demand remains market-driven and there is no fixed operating frequency.

Petronet LNG is upgrading Kochi’s LNG bunkering facility to global standards. Equipment has been received at site, with installation and integration targeted for completion by March 2027. Management sees LNG bunkering as a new revenue opportunity, supported by potential growth in container and trans-shipment traffic.

Dahej: Third Jetty and Petrochemical Growth

At Dahej, the third jetty is a multi-purpose facility intended to handle LNG, ethane and propane. The project was more than 71 per cent complete as of August 25, 2026, below the 81 per cent target due to prolonged monsoon conditions and technical execution challenges. Commissioning is targeted in FY28.

Propane will be feedstock for Petronet LNG’s proposed 750 ktpa PDH and 500 ktpa polypropylene project, which is targeted for mid-FY29. Ethane-handling facilities at the jetty will be offered to third parties on a tolling basis.

ONGC has reserved about 600 ktpa of ethane capacity for 15 years from FY29. Management expects this arrangement to generate about Rs5,000 crore of gross revenue over the contract period. Petronet LNG has also signed a non-binding tripartite MoU with CONCOR and HMEL to explore rail transportation of ethane and propane from Dahej to inland petrochemical plants.

Petrochemical Project Economics and Supply Outlook

Management expects no major issue in sourcing propane, citing abundant and competitively priced US supply. It reiterated estimated annual operating-cost savings of about Rs120 crore from around 19 MW of power savings at the petrochemical project.

Management also highlighted an expected Indian polypropylene demand-supply gap of 4 to 5 mmtpa by 2030.

Compressed Biogas Joint Venture

Petronet LNG has entered a 50:50 joint venture with Gruner Renewable Energy to establish 10 compressed biogas plants of 18 tonnes per day each, or 180 tonnes per day in aggregate, with estimated capital expenditure of Rs1,200 crore.

Management indicated potential GOBARdhan subsidy support of about Rs360 crore, subject to eligibility. At 350 operating days, the plants could produce about 63 ktpa of CBG. Based on management assumptions, the joint venture could generate annual gross revenue of about Rs680 crore, with Petronet LNG’s 50 per cent economic share at about Rs340 crore before operating costs, depreciation and finance costs. Funding structure and partner contributions have not been disclosed.

Regasification Capacity and Tariff Outlook

Management stated that Dahej remains among India’s lowest-cost LNG regasification terminals. Existing capacity-booking contracts are largely secured through FY35, with defined tariffs, escalation, minimum guaranteed utilisation and user-pay provisions.

Petronet LNG is seeking to contract the incremental roughly 5 mmtpa Dahej capacity. Management indicated that tariffs for this capacity would not be below prevailing levels, although final commercial terms were not disclosed.

Key Execution Considerations

• Delayed execution of the Dahej third jetty.
• Uncertain frequency of GUCD demand at Kochi.
• Eligibility for the potential GOBARdhan subsidy.
• Undisclosed funding arrangements and partner contributions for the CBG joint venture.