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UBS Investment Research
Mundra Port and SEZ
Capacity expansion, healthy margins:
Upgrade to Buy
Mundra Port’s capacity expansion is ahead of our estimates
MSEZ is constructing additional bulk (~15mt) and container terminals (2m TEUs),
and de-bottlenecking existing bulk terminals, that can potentially add another
~10mt of capacity. We highlight that volumes have grown at a CAGR of 27% over
last 3yrs and cargo growth has been 26% y/y in H1FY11. MSEZ remains a unique
exposure to Indian port sector and a key beneficiary of strong economic activity.
Cargo growth over FY11-13 to be led by contracted volumes
We expect cargo to grow 2.5x from ~40mt in FY10 to ~98mt in FY13, of which
~35mt would be from long-term contracts (coal and crude). We expect container
tonnage to remain strong (grown at a CAGR of 22% over FY07-10 and 34% y/y in
H1FY11). MSEZ should also benefit from higher coal imports of Adani
Enterprises.
Margins have remained buoyant; increase earnings estimates
Adjusted for one-offs, port sector EBITDA margins have remained healthy at 72%
in H1FY11 (please refer our note Q2FY11: Impacted by one-off expenses dated 25
October 2010). We assume average margins of 71% over FY11-13E. We revise
our EPS estimates from Rs6.2/8.5 to Rs7/9.1 for FY12/13E.
Valuation: Upgrade to Buy with PT of Rs190
Increase in our SOPT-based PT is driven by capacity additions/revision in
estimates. MSEZ has underperformed the market by 17% in last 3m. We expect
news flow to be buoyant led by capacity commissioning in Mundra and new
projects outside Mundra.
it is true . target of rs. 200 is very shortly possible.
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