Petronet LNG Limited (PETRONET) Earnings Call Transcript & Summary

Ladies and gentlemen, you have been connected to Petronet LNG conference call. Please stay connected, the call will begin shortly. Ladies and gentlemen, good day, and welcome to Petronet LNG Limited Q1 FY '27 Earnings Conference Call hosted by Dolat Capital Market Baomited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Yogesh Patel from Sales Capital. Thank you, and over to you, sir.

Thank you, Pari, and good day to everyone. It's my pleasure to welcome all the participants on this call as well as the Petra LNG senior management for the First Quarter FY '27 Results Conference Call. With us, we have Mr. Sara Luka, Director Finance and CFO; Mr. Rakesh Chawla, Executive Director, Aline and Account; Mr. Garin Kumar Sharma, CEO and President, Marketing; Mr. Murat Mittal, GM and President Marketing; Mr. David Sakari, CGM and President, Vice President, Cananea, Mr. Mika Marimar, General [Audio Gap] . Ladies and gentlemen, the line for Yogesh sir has been disconnected, please stay connected, meanwhile I join them. Thank you for waiting patiently, the line for Yogesh sir has been joined. Please proceed with your remarks.

I request Mr. Sorab Mitra to deliver his opening remarks. Over to you, sir.

At the outset, let me briefly take you through our financial and operating performance for the first quarter of financial year . Overall, I wouldn't say it has been a strong start to the year, while volumes were somewhat lower, we have delivered a healthy financial performance supported by commercial and operational efficiencies. On a stand-alone basis, comfort before tax stood at INR 1,514 crores compared to INR 1,136 crores in the corresponding quarter registering a growth of 33%. Profit after tax was INR 1,133 crore, VNA growth of 33% compared to INR 851 crores in the corresponding quarter. On a console basis, too, the performance has been quite intelligent. We reported a PBT of INR 1,491 crores and PAT of INR 1,137 crores, our highest ever BNPAC for any first quarter. Coming to the operational performance, our flagship terminals processed 192 TBtu of LNG during the quarter compared to 270 in the corresponding quarter last year and 200 TBtu in the previous quarter. At the company level, the overall LNG volume process was 270 compared to 220 TBTU in the corresponding quarter and 290 TBtu in the previous quarter. As far as CapEx in is concerned, there is an important point to keep in perspective. For the current quarter, the maintenance capacity of the hedge increased from to 22.5. So the inpation numbers now reflect a significantly larger capacity base. On this expanded capacity, the hedge inflation stood at 66% compared to 92% in the corresponding quarter and 90% in the previous quarter. Overall company implied capacity utilization in the current quarter was to 76% in both the corresponding and previous quarters. So if I were to sum up the quarter, the key takeovers for us is the resilience of the business. Despite lower volumes, we have achieved 33% year-on-year growth in both standard on PBT and PAT. This reflects our continued focus on commercial and operational efficiency and now at to deliver a strong financial performance across different market conditions. We remain focused on carrying this momentum forward as we progress through the year. With that, I will conclude my opening remarks. We now be happy to take your questions.

[Operator Instructions] The first question is from the line of Biren from ICIC Securities.

Thank you, and very good evening, sir a couple of questions. Firstly, you mentioned about the financial performance being strong despite lower is what has also been the thing is that the mix of volumes has changed quite dramatically with storm volume declining very sharp and partly gas volumes making different. Just wanted to understand as that same pattern been seen in Q2 so far as well? And should we basically assume that this will be the mix for gulf conflict is resolved in any shape or manner? That was my first question.

Okay. So yes, the patient trend continues as it was in the Q1 of this financial year, till so far. However, we expect the issues that go to resolve soon and the volumes from our long-term contract with Qatar should we start immediately or as soon as possible. That's our top most in the wishlist.

Got it, sir. The second question was, sir, with respect to apparent margins in terms of how we get performed despite lower volumes. Just wanted to understand where the margin improvement has come from, whether there is any inventory gain in fact for the quarter? And -- or is it basically that marketing margins or even the small amount of spot projects that we did have actually helped offset the lower volumes, your thoughts on that.

So you have actually answered with the point. There is trading gains and also there is inventory gains. The inventory gain is at INR 193 crores and trading gains are at INR 301 crores, so that's exactly because of the annual higher margin and also higher inventory valuation.

Sir, will some of that then normalize in Q2 in the fair way to look at it, at this amount, this kind of margin trend may not sustain for the rest of the year?

Easy to answer to your question, whenever the trade has been that whenever there is a parity between the long term and the spot prices. The start miss are high, and there is a big gap between the long-term prices and the spot prices. And there is a overall throughput goes down because of that. Then what happens is the trading margins kicking because the spot price is being high, we have some opportunities in the market to gain from the -- from the spot trading. So this can we consider looking at the last 5-6 years frame, this can be considered as the business made of the company.

Understood. Sir, if I can squeeze in 1 last question. Any update you want to share on the last bit of connectivity for the Kochi terminal? And any update you can share on the Pet plan?

Okay. So I'll first start with the petchem plant. The project is on due and so far as the connectivity with the pipeline with our Kochi terminal is concerned. As far as the latest information that we have, it's still in the -- by the end of this quarter, it should be mechanically completed. That is the best information that we have as on date.

[Operator Instructions] the next question is from the line of Simen Kumari from Narnolia Financial Services.

My question is related to capacity at -- can we get the suspect specific relation for group at as well as to Kochi Terminal for this quarter? And how would you teutilization to trade over the is -- that is my first question.

So the capacity utilization for [indiscernible] but we do a lot that this is for the expanded capacity we part expanded on the 31st of March 2026. So from 22.5% [indiscernible]

And how do you expect that to feather subsidiary?

We see all this depend on the opening of the Strait of Hormuz. Right now, whatever capacity utilization has been told, same kind of trend is right now going on, and we have before. Once the Strait of Hormuz open, then you see this subsidy volumes and the volumes from that region will be available in the market. So definitely, the capacity -- and you can see from the volume number that currently also, even if that volume is not available [indiscernible] that is being compensated from other parts of the world. So once those volumes are available, definitely, the capacity utilization will improve quite a bit.

And just to add on to what tenant actually in the quarter -- the was on the lower side, many things picked up. So we are actually running at the same rate as it may saline. So this means that probably should be better slightly.

Okay. Can you give the CapEx number for FY '27 as well as FY '28?

CapEx number so far.

No, no, for FY '27, and '28.

FY '27, the CapEx number of INR 964 crores, we have budgeted and similar kind of numbers would be for the FY '28.

Can I speak in 1 last question, which is related to gross margin. Could you just walk us through the key drivers behind this improvement? And what level of gross margin is sustainable going forward? That's my last question.

Can you repeat the question --

What was the reason is significant improvement in the gross margin this quarter -- and how it will like sustain for the remainder of the system?

That's what I had already answered but question -- the gross margin improvement is because of the trading and inventory gain. And in the coming time also, if this such kind of situation in the market is there whereas the spot prices are higher than higher than long-term prices, by its by quite a few areas. Then this kind of trend would be there. But in this kind of a mix, the volume mix that we are seeing right now between the -- like the trading has gone whereas our tolling volumes have gone up and more than 2/3 has been recovered from the croton volumes only. So if this kind of trend in it, then the gross margin will definitely show greater trading in and inventory gain because that is last 5-year trend we have seen in this kind of situation, that is the business model that is in

The next question is from the line of Nitin Tiwari from Philip Capital.

So a couple of clarificatory questions. So in this quarter, like the tolling cargos have broadened to offset our long-term cargoes and our arrangement for basically the use of pay for the previous years has actually been that like if excess cargoes come in, then it will be used for offsetting that user base. So would this polling card will be treated as an offset for user in because this is in excess of what probably 1 would have expected, it's coming in view of the long-term contract. Is that the right understanding?

Listen you are right, partly because you must understand, it depends on who is bringing those long-term care. So it's a rig, they had low of it. So there is no question of offset against cargo. But yes, for other operators, they are being additional control --

But in fact, that the order of have been important is the ranges commitment after that realization offset.

So current year commitment would basically be consider -- I mean, the higher number will only be considered after considering long-term plus tolling as Cainiao what you're seeing?

For in if they are bringing more intel, then the order test Perentia commitment, they have preserved that they only any effect for the past year.

Right. Sir, just like just digging down further on this. [Foreign Language] offsetting users, correct? -- long-term contract is not a part of that arrangement?

Yes, is your understanding your industry direct long-term contracts as well as a is concerned, it is see not.

Okay. So in a way, there's a correct understanding that like this situation continues, then this tone cargo, which is coming in can retire the user pay much faster than possibly which should otherwise been possible.

Absolutely. That's the only.

Understood, sir. And sir, second question is the book 1, if you can give me the IndAS impact for this quarter and gross margin efficient and in other subjects...

At margin level, positive is INR 14 crores and ForEx loss is INR 5 crores. And other expenses level, positive INR 8 crores in depreciation exit and financial INR 48 crores.

[Operator Instructions] The next question is from the line of Maan Maheshwari from Morgan Stanley.

The first question was related to Qatar LNG more on a more medium-term basis. What are you kind of hearing in terms of the supply cargo. Obviously, it's a bit of a fluid situation. But considering the force majeure, et cetera, how are you kind of thinking about sourcing these cargoes from LSI as well as what are you hearing care in general around when can we kind of think about delivering some of these volumes?

So firstly, I'll answer the second question. So we are in constant assure. And they are also waiting for things to improve state-farm really, there is change of safe for the nobody has answered the when the state of power will open -- but the move to as if you see certain media reports yesterday, the catal started production, they're ramping up their production by the measurement there in in terms of the deal around the plant. That level is in which production is increasing. That was a number article yesterday. So as soon as the Strait of Hormuz is opened, we are hopeful that we will start taking volumes from FOB basis from as -- and then your second question was why are not working from alternate sources. So of course, as you have seen is by a either as certain taxation implications. So directly operator for a ISDC is importing that we come more advantageous and lower salable in the market. So we have to be competitive in the market from that perspective, we are given the capacity to be capacity holders to bring more volume and active utilization is on month-on-month basis. So basically, every month, depending on the situation they are regulating. So right now being declared for end of August.