PETRONET

We upgrade PLNG to Buy with a DCF-based TP of INR410/sh. According to our DCF analysis (WACC: 11.2%), at CMP, PLNG is pricing in an unrealistic scenario of a 20% decline in tariff at both the Dahej and Kochi terminals in FY28 with no tariff hike thereafter, and 0% terminal growth. Additionally, the street narrative that competing terminals are taking away market share has: 1) not played out so far as utilization at competitor terminals continues to languish at 14-43%, and 2) overlooked PLNG’s strong scale, historical capex, and connectivity advantages. While concerns around a potential tariff cut in FY28 linger, we highlight that a sharp cut in tariff at Dahej in FY28 can lead to industry-wide pressure, as competing terminals were built at ~2x the capital cost (Dahej capex/mmtpa = ~INR5b vs ~INR9- 11b for competitors). This would further increase the relative attractiveness of the Dahej terminal, especially as its expanded capacity comes online. Outlook At 9.7x FY27 P/E and 4% dividend yield, we believe valuations are at absolute rockbottom levels. We move to a DCF-based TP (earlier 10x FY27 PE) and assume a 10% tariff cut in Dahej and Kochi in FY28, 4% escalation thereafter, 2% terminal growth, and 11.2% WACC, leading to a TP of INR410/share. While we build in full capex for the petchem venture, we value it at only 0.5x equity.