Analysts at Edelweiss Securities are, however, cautious on Petronet LNG
post this deal as they believe the move entails a significant shift from the company’s current utility model and opens up the company to gas price and project execution risk. Moreover, "with current Permian gas prices at USD -1.5/mmbtu (Metric Million British Thermal Unit), an FOB (free-on-board) price for PLNG at USD 3 seems attractive; however, prices will rise by 2025 with significant upcoming liquefaction capacity in the US," they wrote in a report dated September 23.
The brokerage has maintained cautious stance on the stock with a 'HOLD' rating and discounted cash flow (DCF)-based target price of Rs 242/share. "With a domestic surplus of regas capacity, pricing pressure will keep regas margins in check. Diversification into US LNG can return pricing power only if Permian gas prices continue to remain negative. Furthermore, timely startup of Driftwood LNG will become critical for PLNG post equity investment," the brokerage added.
At 12:44 pm, the stock was trading 5 per cent lower at Rs 253.55 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was ruling at 39,403.86, up 1,389 points or 3.65 per cent. On a year-to-date (YTD) basis, shares of Petronet LNG have outperformed the market by rising over 19 per cent (as of Friday's close.) The S&P BSE Sensex, on the other hand, has gained over 5 per cent during the same period.