Petronet LNG shares rise 3%; Motilal Oswal upgrades to 'Buy'; check target

Business Standard

07-07-2025

Petronet LNG shares rose 3.3 per cent in trade, hitting an intraday high of ₹307.85 per share. At 10:46 AM, the stock was trading 2.84 per cent higher at ₹306.45 on the BSE, even as the BSE Sensex was down 0.04 per cent at 83,396.81.
The company's market capitalisation stood at approximately ₹46,050 crore. Its 52-week high is ₹384.9, while the 52-week low is ₹269.9 per share.
Domestic brokerage Motilal Oswal has upgraded its rating on Petronet LNG from 'Neutral' to 'Buy', with a target price of ₹410 per share, based on a Discounted Cash Flow (DCF) model using an 11.2 per cent Weighted Average Cost of Capital (WACC).
The brokerage believes the stock is currently reflecting an overly pessimistic scenario—a 20 per cent tariff cut at both the Dahej and Kochi terminals in FY28, no tariff hikes thereafter, and zero growth in terminal usage. According to Motilal, this assumption appears unrealistic.
Instead, it considers a more realistic scenario to be a 10 per cent tariff cut in FY28, followed by a 4 per cent annual increase, which has been factored into its model. Track Stock Market LIVE Updates
Petronet LNG is currently trading at 9.7x FY27 price-to-earnings and offers a 4 per cent dividend yield, levels the brokerage describes as absolute rock bottom.
The Dahej terminal, a key asset for the company, has continued to operate at near full utilisation, aided by connectivity through five major pipelines, which provide access to key demand centres. Its scale advantage—at 17.5 million tonnes per annum (mmtpa) versus an average terminal size of 5 mmtpa—enables more competitive gas pricing and superior arbitrage opportunities.
A sharp tariff cut at Dahej, however, could exert pressure across the industry, as rival terminals were constructed at nearly twice the cost (₹5 billion per mmtpa for Dahej vs ₹9–11 billion for peers). This cost edge, combined with the upcoming capacity expansion, enhances Dahej's long-term attractiveness.
Addressing concerns about market share loss, Motilal notes that competing terminals have yet to pose a serious threat. Utilisation at rival facilities remains low—between 14 and 43 per cent—despite being operational for several years.
The brokerage also pointed out that the much-anticipated terminal from Swan Energy has not materialised, and even with breakwater construction, GAIL's Dabhol terminal is unlikely to sustain utilisation above 50 per cent annually.