"FAIR VALUE" "PPL" RS. 315

"FAIR VALUE" "PPL" RS. 315

Current Price: Rs.195.50

During 9M08, 84% of PPL’s sales revenue was generated through natural gas sales. International crude oil prices, whichdetermine well head gas prices, are expected to remain around US$100 in the medium term & expiry of 2002 Sui &Kandhkot gas price agreement on Dec07, will be strong catalysts for revenue growth in FY09-FY11. About 60% of thecompany’s gas sales revenue comes from Sui & Kandkot and in 1HY09, the well head gas price is expected to increase by18% to Rs126.8/mmbtu. During Jan-Jun08 the Arab Light Crude prices have risen by 78.4% to US$104.17/bbl fromUS$58.38/bbl in the same period last year. The net income of PPL is expected to grow by 32% in FY’09 and 11.6% inFY’10. At the current price level the stock is trading at a low forward PER of 5.52xBased on the upcoming upward revision in well head gas prices and forecasted sales revenue growth of above 30% inFY09, we recommend investors to take exposure in the stock for medium term. The stock currently offers TSR of 44.0%(including dividend yield of 6.1%) from our target price of Rs315 per share.