Buy Petronet LNG; target of Rs 225: ICICIdirect

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ICICI direct's research report on Petronet LNGDerivatives Outlook: Petronet has been broadly consolidating in the range of 175-190 since the last 7 months and looking at the build up of fresh long positions, we believe the stock may out of this range in the coming days. The open interest in the stock was languishing at lower levels for quite some time now. The recent build up shows the momentum may come back in the stock in the coming days. Infact since the month of June, the stock has been able to hold above 185 levels which shows that strength is possible coming back into the stock as it has been able to hold the relatively higher levels. Near 25% addition is seen in the stock since the last series. We believe the long positions are formed in the stock and recent stock resilience shows the possibilities of good upsides are increasing from the current levels. It witnessed quite high volumes at 197 on Jul 01 and 200 on July 30. As on declines on both the occasions, the falls were arrested near 185 levels and fresh open interest also started. This bodes well for the higher probability of stock moving above 200 in the coming days. We have a target of 225 for the stock.Fundamental Outlook: With India continuing to be significantly short of natural gas supply, Petronet LNG will benefit as the primary play on increasing usage of LNG. In the long term, we expect volumes to remain strong and contribute significantly from FY18 onwards. We have valued the stock based on DCF methodology (WACC 12%, terminal growth 3%) to arrive at a price target of | 225 with a BUY rating. The Dahej expansion to 15 mmtpa is on schedule and is expected to be completed by December 2016. Of this 15 mmtpa capacity, 14.75 mmtpa has been already booked. This focus on tolling volumes will reduce the sourcing & earning volatility risk, says ICICI direct research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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