The brokerage believes the current market price reflects an overly pessimistic scenario, assuming a 20% tariff cut at both the Dahej and Kochi terminals in FY28, no further tariff hikes thereafter, and zero terminal growth.
Contrary to market concerns about losing share to rival terminals, utilisation at competitor facilities remains low (14-43%). Meanwhile, Petronet benefits from strong scale, historical capex, and connectivity advantages.While concerns around a potential tariff cut in FY28 linger, the brokerage argues that any sharp cut at Dahej would create broader industry pressure. This is because Dahej was built at half the capital cost of competing terminals (₹500 crore per mmtpa vs ₹900–1,100 crore for others).
This would further increase the relative attractiveness of the Dahej terminal, especially as its expanded capacity comes online, according to Motilal.The Dahej terminal is also set to expand with an additional 5 mmtpa capacity (over 18%) coming online in December 2025, which is expected to support a 3.3% volume CAGR from FY25 to FY28.
Further visibility comes from the Kochi-Mangalore-Bangalore pipeline, also expected to be completed by December this year, which should boost long-term utilisation at Kochi.
Looking ahead, volume growth is expected to be supported by softening spot LNG prices starting FY27 and a benign crude outlook.
At just 9.7 times its FY27 P/E (price-to-earnings) and a 4% dividend yield, Motilal Oswal sees valuations as highly attractive.
Its model assumes a 10% tariff cut in FY28 at both terminals, followed by a 4% annual escalation, 2% terminal growth, and an 11.2% WACC. For the petchem venture, it factors in full capex but values it conservatively at just 0.5x equity.
