Petronet LNG shares surge 5% as JPMorgan upgrade signals 18% upside potential
Petronet LNG shares surged 5% following JPMorgan's upgrade to 'Overweight' with a ₹335 price target, indicating 18% upside potential. The brokerage cited three key growth drivers: Dahej expansion commissioning in March, 5% tariff escalation, and lower impairment costs. While regulatory risks from PNGRB's potential formal regulation of regasification tariffs remain a concern, JPMorgan believes improving earnings will support the stock in the near term.
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Petronet LNG shares witnessed significant buying interest on Friday, January 9, surging as much as 5% following a positive rating upgrade from global brokerage JPMorgan. The stock closed 3.09% higher at ₹291.90, reflecting strong investor confidence in the LNG terminal operator's growth prospects.
JPMorgan Upgrade Details
JPMorgan upgraded Petronet LNG from its previous rating to 'Overweight' and substantially increased its price target to ₹335 per share. This revised target represents an upside potential of approximately 18% from current market levels, signaling the brokerage's bullish outlook on the company's near-term performance.
| Parameter: | Details |
|---|---|
| New Rating: | Overweight |
| Price Target: | ₹335 per share |
| Upside Potential: | ~18% |
| Current Price: | ₹291.90 |
Key Growth Drivers
The brokerage identified three primary factors expected to drive Petronet LNG's earnings momentum in the coming period:
Dahej Expansion Benefits: The commissioning of the 5 million tonnes per annum Dahej expansion in March is anticipated to significantly boost volumes and operational capacity.
Tariff Escalation: A 5% tariff escalation is expected to contribute positively to the company's revenue streams and margin improvement.
Reduced Impairment Costs: Lower impairment costs could lead to upgrades in consensus earnings estimates for FY28, providing additional support to the stock's valuation.
Regulatory Challenges and Market Concerns
Despite the positive outlook, JPMorgan acknowledged certain valuation concerns that could impact long-term performance. The brokerage flagged potential renegotiation of Dahej tariffs and risks arising from large PDH capital expenditure as key areas of concern. However, these issues are expected to remain unresolved for some time, allowing improving earnings to support the stock in the interim.
Separately, Citi has raised regulatory risks for Petronet LNG, warning that changing regulatory and competitive dynamics could shift bargaining power in favor of the company's offtakers. The Petroleum and Natural Gas Regulatory Board has published a discussion paper analyzing costs across the gas value chain, including regasification operations. PNGRB's recommendations around regasification regulation underscore the regulator's view that terminals should be brought under a formal regulatory framework.
Analyst Sentiment
The broader analyst community remains divided on Petronet LNG's prospects. Among 33 analysts tracking the stock, 15 maintain a 'Buy' rating, while nine each recommend 'Hold' and 'Sell' positions. This mixed sentiment reflects the balance between growth opportunities and regulatory uncertainties facing the LNG sector.
The recent upgrade from JPMorgan, combined with the company's operational expansion plans, suggests that near-term earnings improvement could outweigh longer-term regulatory concerns for investors seeking exposure to India's growing LNG infrastructure sector.
Historical Stock Returns for Petronet LNG
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +1.52% | -0.23% | +6.15% | -5.80% | -13.16% | +7.10% |
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