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PAT in line; EBITDA margin surpasses expectation
Mundra Port & SEZ (MPSEZ) reported Q3FY11 PAT of INR 2.28 bn, in line with
our expectation of INR 2.4 bn, implying a healthy 40% growth over Q3FY10.
Realizations were higher on account of larger proportion of bulk cargo and
container cargo (60% & 33%) handled at the port, while lower administrative
costs resulted in EBITDA margin expanding to ~69% against 66% in Q2FY11.
SEZ land sale continues to disappoint
While land sale at the SEZ continued to be sluggish during the quarter, we
believe numbers could be lumpy in nature and staggered over a period of time.
We have factored an average sale of 500 acres each year FY13 onwards in our
projections over the current base of 2,900 acres of land sold till date from the
date of concession.
Capacity addition aligned to growth plans
The port handled cargo of 12.4 MT during the quarter, i.e., 26% growth Y-o-Y.
Post the commissioning of the 60 MTPA coal terminal during Q3FY11, MPSEZ has
a capacity of 165 MTPA. This is in time to meet the requirement of ~8.6 GW
power plants and also 21 MT of refineries which will ensure assured cargo of 75
MT and 95 MT for FY12E and FY13E, respectively.
Mundra Port an annuity + growth infra asset
Mundra port has diversified the composition of cargo mix handled (bulk, crude,
and container). It has a good mix of long-term and short-term (~50:50) cargo
handling contracts, translating into strong earnings visibility. With comfortable
gearing ratios (0.75 net debt/equity) and possible domestic (LNG terminal and
other brown field ports) and international (Australia and Indonesia) expansion
plans in the pipeline we believe MPSEZ is an ideal infra asset.
Outlook and valuations: Positive; upgrade to ‘BUY’
We have rolled over to FY13 for all our DCFE-based valuations and revised down
our SEZ value due to less-than-anticipated land sales. Incorporating higher Ke in
line with changes in macro assumptions, our current SOTP at INR 164 offers
~24% upside from its CMP of INR 132 with limited risk given strong visibility in
earnings growth over the next couple of years backed up assured cargo take-orpay
agreements. Hence, we upgrade our recommendation on the stock to ‘BUY’
form ‘HOLD’ and rate it ‘Sector Outperformer’ on relative return basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PAT in line; EBITDA margin surpasses expectation
Mundra Port & SEZ (MPSEZ) reported Q3FY11 PAT of INR 2.28 bn, in line with
our expectation of INR 2.4 bn, implying a healthy 40% growth over Q3FY10.
Realizations were higher on account of larger proportion of bulk cargo and
container cargo (60% & 33%) handled at the port, while lower administrative
costs resulted in EBITDA margin expanding to ~69% against 66% in Q2FY11.
SEZ land sale continues to disappoint
While land sale at the SEZ continued to be sluggish during the quarter, we
believe numbers could be lumpy in nature and staggered over a period of time.
We have factored an average sale of 500 acres each year FY13 onwards in our
projections over the current base of 2,900 acres of land sold till date from the
date of concession.
Capacity addition aligned to growth plans
The port handled cargo of 12.4 MT during the quarter, i.e., 26% growth Y-o-Y.
Post the commissioning of the 60 MTPA coal terminal during Q3FY11, MPSEZ has
a capacity of 165 MTPA. This is in time to meet the requirement of ~8.6 GW
power plants and also 21 MT of refineries which will ensure assured cargo of 75
MT and 95 MT for FY12E and FY13E, respectively.
Mundra Port an annuity + growth infra asset
Mundra port has diversified the composition of cargo mix handled (bulk, crude,
and container). It has a good mix of long-term and short-term (~50:50) cargo
handling contracts, translating into strong earnings visibility. With comfortable
gearing ratios (0.75 net debt/equity) and possible domestic (LNG terminal and
other brown field ports) and international (Australia and Indonesia) expansion
plans in the pipeline we believe MPSEZ is an ideal infra asset.
Outlook and valuations: Positive; upgrade to ‘BUY’
We have rolled over to FY13 for all our DCFE-based valuations and revised down
our SEZ value due to less-than-anticipated land sales. Incorporating higher Ke in
line with changes in macro assumptions, our current SOTP at INR 164 offers
~24% upside from its CMP of INR 132 with limited risk given strong visibility in
earnings growth over the next couple of years backed up assured cargo take-orpay
agreements. Hence, we upgrade our recommendation on the stock to ‘BUY’
form ‘HOLD’ and rate it ‘Sector Outperformer’ on relative return basis.
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