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Mundra Port and SEZ (MSEZ)
Infrastructure
Strong 3Q results; marginally ahead of estimates. MPSEZ reported strong 3QFY11
revenues of Rs4.5 bn, up 33% yoy primarily on strong volume growth (26%). Net PAT
of Rs2.3 bn was up 40% yoy and about 10% ahead of our estimates. Volume growth
was led by (1) coal cargo, up 45%, likely led by progress on commissioning of Adani
Power project and (2) container growth of 44%. The port continued to outperform the
sector—major port volumes remained relatively flat in 3Q. Retain BUY.
Strong results driven by volume growth; continues to outperform sector
Revenues up 33% yoy led by strong volumes: MPSEZ reported 3QFY11 standalone revenues
of Rs4.5 bn recording a strong 33% yoy growth, about 6.6% ahead of our estimates. The
strong revenue growth was primarily led by higher volumes—up 26% yoy.
EBITDA margin flat yoy; broadly in line; higher direct operating expenses offset by
lower employee and other expenses: EBITDA margin at 68.7% (our estimate of 68%) was
relatively flat on a yoy basis. However, note a sharp increase in operating expenses as a
percentage of sales, up 350 bps yoy (flat sequentially). The higher operating expenses were
offset by lower employee costs and admin & other expenses as a percentage of sales led by
operating leverage.
Net PAT up 40% yoy: Net profit at Rs2.3 bn was about 10% ahead of our estimate and up
40% yoy.
Strong volume growth led by bulk (progress of Adani Power) and container volumes
Strong volume growth (26%) was led by (1) strong bulk cargo growth (31% yoy), especially coal
(up 45% yoy), likely on account of the increased coal requirement for Adani’s power plant based
on progress in commissioning of the project and (2) container volumes (up 43.6% yoy) likely led by
container terminal-2. The closure of Panipat refinery for expansion works likely led the decline in
crude volume handled at IOCL SPM (down 27% yoy).
Retain estimates and target price of Rs160/share; reiterate BUY
While we have marginally changed our underlying assumptions in the model, there is no material
change to our earnings estimates of Rs4.2 and Rs6.7 for FY2011E and FY2012E. Retain BUY (TP:
Rs160/share) on (1) 18% upside to TP, (2) reasonable valuations, (3) low leverage = low interest
sensitivity, (4) good cash flow generation and (5) strong operational asset with long-term potential.
Key risks relate to (1) sustaining and increasing tariffs, (2) optimal utilization of cash flows and (3)
slower-than-expected SEZ area absorption.
Strong revenue growth led by volumes
MPSEZ reported strong revenues of Rs4.5 bn in 3QFY11 recording a strong growth of
33.4% yoy from Rs3.4 bn, about 6.6% higher than our estimate. The strong revenue
growth was primarily led by higher volumes—up 26% yoy. EBITDA margin at 68.7% was
marginally higher than our estimate by about 70 bps and relatively flat on a yoy basis.
However, we note a sharp increase in operating expenses as a percentage of sales, up 350
bps yoy (flat sequentially). The higher operating expenses were offset by lower employee
costs and admin & other expenses as a percentage of sales led by operating leverage. MPSEZ
reported a net PAT of Rs2.3 bn, about 9.7% higher than our estimate of Rs2.2 bn and up
40% on a yoy basis.
For the nine months ending December 31, 2010, MPSEZ reported revenues of Rs12.8 bn, up
31.7% yoy. Margins were down 250 bps yoy to 68.2% in 9MFY11 on account of higher
direct operating expenses as a percentage of sales. MPSEZ reported 9MFY11 net PAT of
Rs6.5 bn, up 28% yoy.
Strong port volume growth led by bulk (especially coal) and container
Strong revenue growth in 3QFY11 was primarily led by strong volume growth during the
quarter. Total volumes handled at the port grew by 26% yoy to 12.4 MMT in 3QFY11 (flat
on a sequential basis) from 9.8 MMT in 3QFY10. The volume growth was led by bulk
(especially coal) and container cargo.
Bulk cargo: Bulk cargo handled at Mundra port grew by 31% yoy primarily led by strong
coal cargo growth, up 45% yoy. The strong growth in coal cargo is likely to have been
due to increased coal imports for the power plant being developed by Adani Power Ltd
based on progress on commissioning of the project. Other bulk cargo also recorded a
strong growth of about 23% yoy.
Container cargo: Container cargo at Mundra port grew by 43.6% yoy to 325,000 TEUs
in 3QFY11 from 226,000 TEUs in 3QFY10. We believe that the container volumes are
likely to have been driven by sharper pick-up in volumes in CT-2.
Crude cargo: Mundra port reported a 27% yoy decline in the crude cargo for the IOCL
SPM likely due to closure of Panipat refinery for expansion works.
Port has outperformed the sector in terms of volume growth
In 3QFY11, Mundra port recorded a total cargo growth of 26%. This is versus marginal
growth of just 0.7% for major ports in India. In the container segment, Mundra port
recorded growth of 43.7% versus a yoy growth of 10.3% in the average container volumes
handled at major ports. The port has also performed better (in terms of growth) versus its
nearest peer, Kandla port, which recorded a marginal growth (3.4% yoy) in total cargo in
3QFY11 and 13% growth in container cargo.
Mundra is among the largest operational ports of the country
Mundra port ranked at the 7th position amongst major ports of the country in terms of total
volumes handled at the port in 9MFY11. Further, Mundra port ranks third in terms of
container cargo handled in 9MFY11 amongst major ports. We note that the port has
improved its ranking since FY2010. Based on volumes handled in FY2010, Mundra port
stood at #8 among the major ports versus its present ranking of #7.
Retain estimates and target price of Rs160/share; reiterate BUY
While we have marginally changed our underlying assumptions in the model, there is no
material change to our earnings estimates of Rs4.2 and Rs6.7 for FY2011E and FY2012E,
respectively.
We have retain our SOTP-based target price of Rs160/share comprised of (1) Rs122/share
from the Mundra port business (FY2012E-based DCF valuation), (2) Rs21/share from the SEZ
business, (3) Rs4.6/share from Dahej port value, (4) Rs4.3/share from Mormugao and Hazira
ports, and (5) Rs1.7/share from book value of investments in Adani Logistics.
We retain our BUY rating on MPSEZ based on (1) about 18% upside to our target price and
more reasonable valuations, (2) strong likely near-term earnings growth led by long-term
fixed contracts, (3) visible strong cash flow generation (expected EBITDA of Rs13 bn in
FY2011E), (4) relatively low leverage on balance sheet making it relatively insensitive to
interest rates versus other infrastructure players, (5) low dependence on market cycles as
majority of port volumes are linked to energy imports (coal for upcoming power plants), (6)
long-term potential to add capacity at Mundra port led by availability of large waterfront,
and (7) good historical track record in terms of capacity and volume ramp-up.
Key risks relate to (1) inability to sustain tariffs at current/projected levels, (2) potential
utilization of strong cash flows, (3) delays in associated infrastructure projects (power plant,
refineries etc.) and (4) slower-than-expected SEZ area absorption.
Valuations reasonable particularly on FY2013E basis
MPSEZ (adjusted for Rs32/share from value from the SEZ and other subsidiary assets) is
currently trading at a relatively cheap valuation of about 14X FY2012E and 9.6X FY2013E
EV/EBITDA. Our target price of Rs160/share implies an EV/EBITDA 17X for FY2012E and 12X
FY2013E. We believe this premium is justified based on higher growth potential led by
strong and visible volume pick-up.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mundra Port and SEZ (MSEZ)
Infrastructure
Strong 3Q results; marginally ahead of estimates. MPSEZ reported strong 3QFY11
revenues of Rs4.5 bn, up 33% yoy primarily on strong volume growth (26%). Net PAT
of Rs2.3 bn was up 40% yoy and about 10% ahead of our estimates. Volume growth
was led by (1) coal cargo, up 45%, likely led by progress on commissioning of Adani
Power project and (2) container growth of 44%. The port continued to outperform the
sector—major port volumes remained relatively flat in 3Q. Retain BUY.
Strong results driven by volume growth; continues to outperform sector
Revenues up 33% yoy led by strong volumes: MPSEZ reported 3QFY11 standalone revenues
of Rs4.5 bn recording a strong 33% yoy growth, about 6.6% ahead of our estimates. The
strong revenue growth was primarily led by higher volumes—up 26% yoy.
EBITDA margin flat yoy; broadly in line; higher direct operating expenses offset by
lower employee and other expenses: EBITDA margin at 68.7% (our estimate of 68%) was
relatively flat on a yoy basis. However, note a sharp increase in operating expenses as a
percentage of sales, up 350 bps yoy (flat sequentially). The higher operating expenses were
offset by lower employee costs and admin & other expenses as a percentage of sales led by
operating leverage.
Net PAT up 40% yoy: Net profit at Rs2.3 bn was about 10% ahead of our estimate and up
40% yoy.
Strong volume growth led by bulk (progress of Adani Power) and container volumes
Strong volume growth (26%) was led by (1) strong bulk cargo growth (31% yoy), especially coal
(up 45% yoy), likely on account of the increased coal requirement for Adani’s power plant based
on progress in commissioning of the project and (2) container volumes (up 43.6% yoy) likely led by
container terminal-2. The closure of Panipat refinery for expansion works likely led the decline in
crude volume handled at IOCL SPM (down 27% yoy).
Retain estimates and target price of Rs160/share; reiterate BUY
While we have marginally changed our underlying assumptions in the model, there is no material
change to our earnings estimates of Rs4.2 and Rs6.7 for FY2011E and FY2012E. Retain BUY (TP:
Rs160/share) on (1) 18% upside to TP, (2) reasonable valuations, (3) low leverage = low interest
sensitivity, (4) good cash flow generation and (5) strong operational asset with long-term potential.
Key risks relate to (1) sustaining and increasing tariffs, (2) optimal utilization of cash flows and (3)
slower-than-expected SEZ area absorption.
Strong revenue growth led by volumes
MPSEZ reported strong revenues of Rs4.5 bn in 3QFY11 recording a strong growth of
33.4% yoy from Rs3.4 bn, about 6.6% higher than our estimate. The strong revenue
growth was primarily led by higher volumes—up 26% yoy. EBITDA margin at 68.7% was
marginally higher than our estimate by about 70 bps and relatively flat on a yoy basis.
However, we note a sharp increase in operating expenses as a percentage of sales, up 350
bps yoy (flat sequentially). The higher operating expenses were offset by lower employee
costs and admin & other expenses as a percentage of sales led by operating leverage. MPSEZ
reported a net PAT of Rs2.3 bn, about 9.7% higher than our estimate of Rs2.2 bn and up
40% on a yoy basis.
For the nine months ending December 31, 2010, MPSEZ reported revenues of Rs12.8 bn, up
31.7% yoy. Margins were down 250 bps yoy to 68.2% in 9MFY11 on account of higher
direct operating expenses as a percentage of sales. MPSEZ reported 9MFY11 net PAT of
Rs6.5 bn, up 28% yoy.
Strong port volume growth led by bulk (especially coal) and container
Strong revenue growth in 3QFY11 was primarily led by strong volume growth during the
quarter. Total volumes handled at the port grew by 26% yoy to 12.4 MMT in 3QFY11 (flat
on a sequential basis) from 9.8 MMT in 3QFY10. The volume growth was led by bulk
(especially coal) and container cargo.
Bulk cargo: Bulk cargo handled at Mundra port grew by 31% yoy primarily led by strong
coal cargo growth, up 45% yoy. The strong growth in coal cargo is likely to have been
due to increased coal imports for the power plant being developed by Adani Power Ltd
based on progress on commissioning of the project. Other bulk cargo also recorded a
strong growth of about 23% yoy.
Container cargo: Container cargo at Mundra port grew by 43.6% yoy to 325,000 TEUs
in 3QFY11 from 226,000 TEUs in 3QFY10. We believe that the container volumes are
likely to have been driven by sharper pick-up in volumes in CT-2.
Crude cargo: Mundra port reported a 27% yoy decline in the crude cargo for the IOCL
SPM likely due to closure of Panipat refinery for expansion works.
Port has outperformed the sector in terms of volume growth
In 3QFY11, Mundra port recorded a total cargo growth of 26%. This is versus marginal
growth of just 0.7% for major ports in India. In the container segment, Mundra port
recorded growth of 43.7% versus a yoy growth of 10.3% in the average container volumes
handled at major ports. The port has also performed better (in terms of growth) versus its
nearest peer, Kandla port, which recorded a marginal growth (3.4% yoy) in total cargo in
3QFY11 and 13% growth in container cargo.
Mundra is among the largest operational ports of the country
Mundra port ranked at the 7th position amongst major ports of the country in terms of total
volumes handled at the port in 9MFY11. Further, Mundra port ranks third in terms of
container cargo handled in 9MFY11 amongst major ports. We note that the port has
improved its ranking since FY2010. Based on volumes handled in FY2010, Mundra port
stood at #8 among the major ports versus its present ranking of #7.
Retain estimates and target price of Rs160/share; reiterate BUY
While we have marginally changed our underlying assumptions in the model, there is no
material change to our earnings estimates of Rs4.2 and Rs6.7 for FY2011E and FY2012E,
respectively.
We have retain our SOTP-based target price of Rs160/share comprised of (1) Rs122/share
from the Mundra port business (FY2012E-based DCF valuation), (2) Rs21/share from the SEZ
business, (3) Rs4.6/share from Dahej port value, (4) Rs4.3/share from Mormugao and Hazira
ports, and (5) Rs1.7/share from book value of investments in Adani Logistics.
We retain our BUY rating on MPSEZ based on (1) about 18% upside to our target price and
more reasonable valuations, (2) strong likely near-term earnings growth led by long-term
fixed contracts, (3) visible strong cash flow generation (expected EBITDA of Rs13 bn in
FY2011E), (4) relatively low leverage on balance sheet making it relatively insensitive to
interest rates versus other infrastructure players, (5) low dependence on market cycles as
majority of port volumes are linked to energy imports (coal for upcoming power plants), (6)
long-term potential to add capacity at Mundra port led by availability of large waterfront,
and (7) good historical track record in terms of capacity and volume ramp-up.
Key risks relate to (1) inability to sustain tariffs at current/projected levels, (2) potential
utilization of strong cash flows, (3) delays in associated infrastructure projects (power plant,
refineries etc.) and (4) slower-than-expected SEZ area absorption.
Valuations reasonable particularly on FY2013E basis
MPSEZ (adjusted for Rs32/share from value from the SEZ and other subsidiary assets) is
currently trading at a relatively cheap valuation of about 14X FY2012E and 9.6X FY2013E
EV/EBITDA. Our target price of Rs160/share implies an EV/EBITDA 17X for FY2012E and 12X
FY2013E. We believe this premium is justified based on higher growth potential led by
strong and visible volume pick-up.
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