Petronet LNG's Q2 Surprise: Mixed Analyst Views Hit Stock, But Future Expansion Shines Bright!

Summary Petronet LNG Limited’s September quarter (Q2FY26) results were met with a mixed reception from analysts. The company demonstrated steady operational performance, but earnings were negatively affected by foreign exchange losses and provisions made for Use-or-Pay (UoP) contracts.

Analyst Views While most brokerages revised their near-term earnings estimates downwards, they largely maintained a positive long-term outlook. This optimism is supported by anticipated capacity expansions and an expected recovery in volumes from the Kochi terminal. Despite this, Petronet LNG shares experienced a decline on the stock exchanges.

Brokerage Insights Nomura maintained a 'Buy' rating with a target price of ₹360, noting resilient operations despite forex and UoP impacts. Nuvama retained its 'Buy' rating, reducing the target to ₹339, citing strong cash flows and growth projects. Motilal Oswal reiterated 'Buy' at a target of ₹390, seeing attractive valuations. Conversely, PL Capital maintained a 'Hold' rating with a target of ₹290, expressing caution over near-term profitability and potential ROCE dilution.

Key Projects & Outlook Management confirmed progress on major projects like the Dahej expansion and the Bengaluru-Kochi pipeline, expected by end-FY26. Significant capex is planned for a petrochemical plant. The Gopalpur terminal is progressing through environmental clearance. Analysts believe near-term earnings pressure is temporary, with capacity additions being key growth drivers.

Impact This news has a moderate impact on the Indian stock market, particularly affecting the energy and gas sector stocks and investor sentiment towards Petronet LNG. While short-term stock performance may be subdued due to the earnings dip, the long-term growth prospects are viewed positively by most analysts. Rating: 6/10

Difficult Terms * **Use-or-Pay (UoP) provisions**: Contractual arrangements where a buyer commits to pay for a minimum quantity of a service or product, irrespective of actual consumption. Provisions are amounts set aside to cover potential liabilities under such contracts. * **Foreign Exchange (Forex) losses**: Financial losses incurred due to adverse movements in currency exchange rates between the time a transaction is agreed upon and when it is settled. * **EBITDA**: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operational profitability. * **TBTU**: Trillion British Thermal Units. A standard unit for measuring large quantities of energy, commonly used for natural gas. * **MTPA**: Million Tonnes Per Annum. A unit used to measure the processing or production capacity of industries like oil, gas, or manufacturing. * **DCF**: Discounted Cash Flow. A valuation method that estimates the value of an investment based on its expected future cash flows, discounted to their present value. * **RoE**: Return on Equity. A financial ratio that shows how much profit a company generates with the money shareholders have invested. * **RoCE**: Return on Capital Employed. A profitability metric that assesses how efficiently a company uses its capital to generate profits. * **EPS**: Earnings Per Share. The portion of a company's profit allocated to each outstanding share of its common stock, used to measure profitability.