Petronet LNG (PLNG) has reported a year-on-year increase in earnings before interest, taxes, depreciation, and amortization (EBITDA) by 4% to INR 12.1 billion, and profit after tax (PAT) by 10% to INR 8.2 billion. The company also saw a quarter-on-quarter rise of 3/4%.
The company's investment in the PDHPP plant has escalated primarily due to costs associated with an ethane handling facility and other undisclosed expenses. The investment now stands at INR 210 billion, which is significantly higher than the initial estimate of INR 140 billion.
Despite management's claim of a projected internal rate of return (IRR) of 20%, analysis indicates a lower return profile. While Petronet LNG has been grappling with low valuations, underperformance, high dividends, and consistent earnings per share (EPS) growth, these factors are counterbalanced by a risky diversification strategy on an unprecedented scale.
In view of these developments, PLNG shares have been given a 'hold' recommendation with a revised target price of INR 210. The company's diversification strategy appears to be a considerable risk factor that could affect future performance.
InvestingPro Insights
Drawing from InvestingPro's real-time data, we can glean further insights into Petronet LNG's (PLNG) financial health and market position. An InvestingPro Tip reveals that PLNG yields a high return on invested capital and holds more cash than debt on its balance sheet, suggesting a robust financial position. This is further supported by the fact that the company has managed to maintain dividend payments for 17 consecutive years, demonstrating financial stability and commitment to shareholder returns.
On the trading front, PLNG's stock has been hit hard recently, trading near its 52-week low, according to InvestingPro data. Despite this, the company remains a prominent player in the Oil, Gas & Consumable Fuels industry and is expected to return to profitability this year, as per analyst predictions.
For those interested in further analysis, InvestingPro offers a wealth of additional tips - 11 more for PLNG alone. These include insights into the company's return on assets, P/E ratio relative to near-term earnings growth, and the liquidity of its assets, among others. These insights can provide a more nuanced understanding of PLNG's financial performance and market position.
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