Petronet LNG Share Price Target at Rs 410: Motilal Oswal
Motilal Oswal Financial Services has issued a BUY recommendation on Petronet LNG, setting a target price of Rs 410 per share, representing a potential upside of 37% from current levels. The research underscores that prevailing market pessimism is overdone, with the stock trading at compelling valuations and robust fundamentals. The report challenges bearish narratives around tariff cuts and competitive threats, highlighting Petronet’s operational dominance, strategic infrastructure, and imminent capacity expansion. Investors are advised to consider the attractive risk-reward profile, as the company is poised for a re-rating driven by volume growth, resilient margins, and a healthy dividend yield.
Market Concerns Overstated: Competitive Threats Largely Unfounded
The narrative that rival LNG terminals are eroding Petronet’s market share is not substantiated by utilization data or industry trends. While competitors’ terminals languish at 14-43% utilization, Petronet’s Dahej terminal consistently operates near full capacity, leveraging its superior connectivity and scale. The much-anticipated Swan Energy terminal has yet to materialize, and even GAIL’s Dabhol facility is unlikely to sustain utilization above 50% annually, despite infrastructure upgrades.
Dahej Terminal: The Crown Jewel of Indian LNG Infrastructure
Petronet’s Dahej terminal stands as a formidable moat, underpinned by five major pipeline connections and a 17.5 million metric ton per annum (mmtpa) capacity—over three times larger than the average Indian terminal. This scale enables Petronet to secure lower-priced gas contracts and exploit arbitrage opportunities unavailable to smaller competitors. Notably, Dahej’s capital cost per mmtpa is approximately Rs 5 billion, compared to Rs 9-11 billion for rival terminals, reinforcing its cost leadership and competitive edge.
Capacity Expansion and Volume Growth: Catalysts for Re-Rating
The upcoming 5 mmtpa capacity addition at Dahej, slated for December 2025, is set to boost volumes by 3.3% CAGR over FY25-28. This expansion, combined with the expected completion of the Kochi-Mangalore-Bangalore pipeline, will enhance medium- to long-term visibility and utilization at the Kochi terminal. Lower spot LNG prices anticipated from FY27 and a benign crude outlook further strengthen the growth narrative.
Financial Projections: Solid Earnings and Attractive Returns
Petronet LNG is forecast to deliver a PAT CAGR of 9% during FY25-27E, driven by volume growth and scheduled tariff hikes. The company’s return on equity (RoE) is projected at 20% for FY27E, with EBITDA margins expanding to 13.1%. The payout ratio remains healthy at 38.2%, supporting a dividend yield of 4%. The following table summarizes key financial metrics:
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| Sales (Rs bn) | 509.8 | 506.2 | 536.1 |
| EBITDA (Rs bn) | 55.2 | 59.2 | 70.1 |
| Adj. PAT (Rs bn) | 39.3 | 39.9 | 46.6 |
| EPS (Rs) | 26.2 | 26.6 | 31.0 |
| RoE (%) | 21.6 | 19.4 | 20.0 |
| Dividend Yield (%) | 3.3 | 3.4 | 4.0 |
Valuation: Rock-Bottom Multiples and Multiple Upside Scenarios
Petronet LNG’s current valuation reflects maximum pessimism, with the stock trading below its historical one-year forward P/E of 10.4x. Motilal Oswal’s base-case DCF yields a fair value of Rs 410, while even in bear and extreme bear scenarios, the downside appears limited, with target prices of Rs 363 and Rs 288, respectively. The market’s implied scenario of simultaneous tariff cuts and volume loss is deemed highly improbable by the analysts.
Key Investment Levels and Technical Markers
Current Market Price (CMP): Rs 300
52-Week Range: Rs 270 – Rs 385
Target Price (TP): Rs 410 (+37%)
Dividend Yield: 4% (FY27E)
Support Level: Rs 270
Resistance Level: Rs 385
Risks and Sensitivities
Potential risks include a sharper-than-expected tariff cut, prolonged competitive pressure, or delays in capacity ramp-up. However, the report emphasizes that even under conservative assumptions, Petronet’s operational and financial resilience should shield investors from significant downside.
Compelling Risk-Reward for Long-Term Investors
Motilal Oswal’s analysis positions Petronet LNG as a quintessential value play in India’s energy infrastructure landscape. With robust cash flows, a dominant market position, and a clear path to growth, the stock offers a compelling entry point for investors seeking both capital appreciation and stable dividends. The tide appears to be turning, and the risk-reward calculus is firmly skewed in favor of the patient investor.
