Motilal Oswal has upgraded Petronet LNG to a BUY rating with a target price of Rs 410, representing a substantial 50% upside from current levels of Rs 274. The research house emphasizes that PLNG's strategic capacity expansion at Dahej terminal, coupled with India's robust LNG import growth projections of 6% CAGR through FY30, positions the company advantageously. Despite market share erosion to 69% from historical 78%, the upcoming 5mmtpa Dahej expansion and operational challenges at competing terminals create compelling re-rating catalysts for long-term investors.

Motilal Oswal Signals Strong BUY on Infrastructure Moat

Motilal Oswal Financial Services has issued a compelling BUY recommendation on Petronet LNG Limited (PLNG), setting an ambitious target price of Rs 410 against the current market price of Rs 274. This recommendation represents a significant 50% upside potential, underpinned by the brokerage's conviction in PLNG's structural advantages and India's accelerating energy transition narrative.

The research house's upgrade stems from what analysts describe as "inexpensive valuations and strong upcoming capacity growth." At current levels, PLNG trades at a modest 8.9x FY27E P/E multiple, substantially below its historical one-year forward P/E of 10.4x, signaling what Motilal Oswal characterizes as "maximum pessimism" pricing.

Strategic Capacity Expansion Amid Market Share Pressures

PLNG's market positioning reveals a nuanced story of constrained growth opportunities despite temporary market share erosion. The company's share in India's total LNG imports has declined to 69% in FY25 from a commanding 78% in FY15, primarily due to limited regasification capacity additions over the past decade.

However, the upcoming 5mmtpa Dahej expansion, scheduled for commissioning by December 2025, represents a pivotal inflection point. This strategic capacity addition, combined with PLNG's entrenched infrastructural moat and cost-efficient regas tariffs, positions the company to capture incremental import growth effectively.

Key operational metrics demonstrate PLNG's dominance:

India's LNG Import Trajectory: Robust 6% CAGR Projections

The fundamental thesis supporting PLNG's investment case centers on India's accelerating natural gas consumption patterns. Historical data reveals that India's LNG imports grew at a 7.3% CAGR over FY15-25, reaching 98mmscmd in FY25, while domestic production remained relatively stagnant at just 1% CAGR.

Forward-looking projections paint an even more compelling picture:

PNGRB expects 8% CAGR in India's natural gas consumption over FY24-CY30

IEA forecasts 6.6% CAGR in India's NG demand over CY23-30

CNG consumption anticipated to grow 2.5x-3.5x by CY30 from FY24 baseline

Motilal Oswal's conservative modeling assumes a 4.5% CAGR in India's natural gas consumption over FY25-30, coupled with a 2% CAGR in domestic production. These parameters necessitate LNG imports to grow at 6% CAGR, translating to approximately 32mmscmd incremental import requirements through FY30.

Conservative Market Share Assumptions Create Upside Potential

Despite PLNG's current 69% market share in India's total LNG imports, Motilal Oswal's analysis incorporates only a 41% share of incremental import growth. This conservative assumption of capturing approximately 13mmscmd of additional volumes appears deliberately prudent given PLNG's competitive advantages.

The research house has already secured a 5.5-year regasification service agreement for the expanded Dahej capacity, covering 0.5mmtpa of committed volumes from July 2026 to December 2031. This contract structure implies tariff rates of approximately Rs 93.1/mmbtu with estimated EBITDA margins of 90%.

Global LNG Supply Dynamics: Structural Tailwinds

International market dynamics strongly favor LNG importers like PLNG. Global liquefaction capacity is projected to increase by 10-11% annually in CY26-27, significantly outpacing historical demand growth rates of 5-6%. This supply abundance should create a "lower-for-longer" LNG pricing environment, benefiting import-dependent markets like India.

Major capacity additions include:

Qatar's North Field East: 43.5 bcm/year (2026)

US Golden Pass LNG: 21.2 bcm/year (2025)

Canada LNG: 19.0 bcm/year (2025)

Competitive Landscape: Operational Bottlenecks Sustain PLNG's Edge

Competing terminals face significant operational constraints that reinforce PLNG's competitive positioning. Dabhol terminal operates at approximately 50% utilization due to chronic air heater issues and pipeline evacuation restrictions. Hazira remains constrained by limited long-term offtake agreements, while Mundra faces pipeline bottlenecks limiting evacuation capacity to roughly 2mtpa.

The newly constructed Chhara terminal lacks sufficient downstream connectivity, with no major trunk pipeline linking it to Gujarat's core gas grid. These infrastructure deficiencies across competing facilities create sustainable competitive advantages for PLNG's well-established operations.

Financial Projections and Target Price Methodology

Motilal Oswal's DCF analysis (WACC: 10.5%) supports the Rs 410 target price through conservative assumptions. The valuation model incorporates a 10% tariff cut in FY28, followed by 4% annual increases for both terminals. Even under extreme bear-case scenarios assuming 20% tariff cuts and zero terminal growth, the intrinsic value reaches Rs 274, matching current market levels.

Key financial projections:

Investment levels for consideration:

Accumulation Zone: Rs 270-290

Target Price: Rs 410

Stop Loss: Rs 250

Time Horizon: 12-18 months

The combination of attractive valuations, structural growth drivers, and competitive positioning makes PLNG a compelling investment proposition for investors seeking exposure to India's energy transition narrative.