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Mundra Port & SEZ Ltd.: Port Excellent But SEZ Disappoint
2Q Rec PAT +22% as coal & containers drive cargo +25%YoY ; Buy
MPSEZ 2QFY11 Rec. PAT Rs2.1bn was -12% BofAMLe on shift in Rs180mn
worth SEZ land-sale bookings to 3Q, while cargo rebound +25%YoY drove port
income +45%YoY and re-pricing of debt (interest cost -37%YoY) led PAT
+22%YoY. Maintain Buy on rebound in its port traffic from FY11 and SEZ
monetization from FY12E, which should drive its EPS at a CAGR of 41% over
FY10-12E. A scaleable and deep draft port on the western coast, a low-cost >20k
acres of contiguous land bank – India’s largest port-linked SEZ – and unleveraged
balance sheet (net D/E 0.7x), which supports new project wins in India,
Australia and Indonesia, are key arguments for our Buy.
Coal +54%; CT2 TEUs +161%, fertilizer +102%; SEZ Booking Shift
Mundra Port (78 of SOTP) saw 2Q cargo of 12.6mmT led by minerals & others
+162%, fertilizer +102%, coal +54% and container cargo +38%YoY despite crude
-28% on a refinery upgrade. 2QFY11 Rec. PAT Rs2.1bn grew +22%YoY (-12%
BofAMLe) on slippage of Rs180mn booking in SEZ to 3Q. However, Rep. PAT of
Rs2.1bn +21%YoY on Rs11mn of exchange gain vs Rs22mn of exchange gain in
2Q10. Scale-up in CT2 volumes and start of 37mtpa coal terminal in Nov’10 are
key driver of volumes ahead.
East Coast & Dudgeon Point catalyst round the corner
MPSEZ is getting ready for scale-up its ports business beyond Gujarat state. It
has already started construction at Goa & Hazira, is close to signing a deal for a
port on the east coast of India and ADE/MPSEZ has secured the right to develop
a 30-60mmtpa coal terminal at Dudgeon Point, Queensland - near the existing
coal terminals of Hay Point and Dalrymple Bay. MPSEZ may also set-up 35-
50mtpa port to evacuate coal from Tanjung Enim mines of PTBA for ADE.
Superior assets drive RoCE >WACC; Maintain Buy
We value MPSEZ at Rs172 based on SOTP of project DCFs. New concessions wins
and potential SEZ land bank scale up to 32k acres are future catalysts. Risks: Global
recession impacting traffic at ports and slow recovery in private capex at SEZs.
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