Friends,
I came across a report on the Indian LNG, Gas Sector published on ET today...
I am pasting the exact report for my readers....
____________________________________
Liquefied natural gas, or LNG, will remain an important component of Indian gas supplies and Southern India with its current lack of gas infrastructure will be a key geography for growth in demand, particularly for LNG, says a JP Morgan report on India Gas. This provides huge opportunities for Indian gas utilities, and could result in their shares being rerated in the near future, the broking firm says in its report.
“The landed cost of domestic gas in these geographies (Southern markets) will make LNG competitive,” says JP Morgan analyst Pradeep Mirchandani.
According to him, the positive view on long-term viability of LNG in India’s energy basket stems from the better economics of LNG vis-à-vis liquid fuels which currently comprise 36% of India’s primary energy consumption.
“Given the current oversupply in the LNG market and the rise of shale gas production in the US, we believe LNG economics will be favourable and India should be able to source LNG competitively in the medium term,” says Mr Mirchandani.
The report goes on to add that future demand projections are premised on a significant portion of the incremental gas volumes being used for power generation.
“We envisage a scenario wherein domestic gas will provide base load generation and LNG will be used for peaking power demand,” he adds.
Gas utility stocks have been strong performers (25% outperformance) over the past 12 months. The interest in these shares has been driven by better volume visibility pushing up earnings, growth expectations, and better regulatory clarity.
Using a three-stage discounted cash flow, or DCF, model to capture the periods of significant growth, JP Morgan sees a 23-51% upside potential for their overweight gas utility stocks — GAIL, GSPL, PLNG.
“For city gas distribution companies (DSM Infratech, Gail Gas and Bhagyanagar Gas), we believe current stock valuations adequately factor in the growth trend in volumes and earnings. We continue to see value in upstream companies GAIL, GSPL and Petronet LNG, which should be key beneficiaries of continued demand growth for LNG to plug India’s demand-supply gap,” explained Mr Mirchandani.
He is of the view that the catalysts for stock performance would be commissioning of projects (pipeline sections, LNG terminal) supporting volumes, and tariff notifications for new and existing networks. Risk emanates from project delays and delays in volume ramp-up.
“Petroluem and natural gas regulatory body’s, or PNGRB, tariff order for GAIL’s HVJ-DVPL network and expansion should provide for a healthy return on infrastructure investment (20-25% RoE), especially with a judicious use of leverage.
Also, the regulator does not cap marketing margins which increase returns for GAIL and the CGD companies. However, we note that the regulatory structure is still evolving and issues need to be sorted to enable continued investments in the sector,” says the India Gas reports.
“The landed cost of domestic gas in these geographies (Southern markets) will make LNG competitive,” says JP Morgan analyst Pradeep Mirchandani.
According to him, the positive view on long-term viability of LNG in India’s energy basket stems from the better economics of LNG vis-à-vis liquid fuels which currently comprise 36% of India’s primary energy consumption.
“Given the current oversupply in the LNG market and the rise of shale gas production in the US, we believe LNG economics will be favourable and India should be able to source LNG competitively in the medium term,” says Mr Mirchandani.
The report goes on to add that future demand projections are premised on a significant portion of the incremental gas volumes being used for power generation.
“We envisage a scenario wherein domestic gas will provide base load generation and LNG will be used for peaking power demand,” he adds.
Gas utility stocks have been strong performers (25% outperformance) over the past 12 months. The interest in these shares has been driven by better volume visibility pushing up earnings, growth expectations, and better regulatory clarity.
Using a three-stage discounted cash flow, or DCF, model to capture the periods of significant growth, JP Morgan sees a 23-51% upside potential for their overweight gas utility stocks — GAIL, GSPL, PLNG.
“For city gas distribution companies (DSM Infratech, Gail Gas and Bhagyanagar Gas), we believe current stock valuations adequately factor in the growth trend in volumes and earnings. We continue to see value in upstream companies GAIL, GSPL and Petronet LNG, which should be key beneficiaries of continued demand growth for LNG to plug India’s demand-supply gap,” explained Mr Mirchandani.
He is of the view that the catalysts for stock performance would be commissioning of projects (pipeline sections, LNG terminal) supporting volumes, and tariff notifications for new and existing networks. Risk emanates from project delays and delays in volume ramp-up.
“Petroluem and natural gas regulatory body’s, or PNGRB, tariff order for GAIL’s HVJ-DVPL network and expansion should provide for a healthy return on infrastructure investment (20-25% RoE), especially with a judicious use of leverage.
Also, the regulator does not cap marketing margins which increase returns for GAIL and the CGD companies. However, we note that the regulatory structure is still evolving and issues need to be sorted to enable continued investments in the sector,” says the India Gas reports.
_____________________________________
My Comments
I have already mentioned GSPL in my previous write-ups.... it is one such stock that can give enormous return in long run... though there may not be immediate fireworks in it....... Gas Sector is now catching up in Indian market... for me it has huge huge potential of business in years to come... may for for another 20-30-40 years... continuous business... One more Stock i would like to mention in ONGC... there are stories building up now in ONGC...
My Comments
I have already mentioned GSPL in my previous write-ups.... it is one such stock that can give enormous return in long run... though there may not be immediate fireworks in it....... Gas Sector is now catching up in Indian market... for me it has huge huge potential of business in years to come... may for for another 20-30-40 years... continuous business... One more Stock i would like to mention in ONGC... there are stories building up now in ONGC...
No comments:
Post a Comment