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Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Jun-q PAT slightly below estimate, but stock
valuations appear attractive
MPSEZ reported net sales of Rs5.16B (up 27.2% YoY), slightly ahead of
our estimate of Rs5.03B: Total cargo handled at MP in Jun-q was 15.08MMT
(up 19.5%), in line with feedback received from management earlier. Implied
realization of Rs342/MT (including SEZ income of ~Rs60mn@Rs10mn/acre)
compares favorably with our est. of Rs335/MT.
Jun-q PAT of Rs2.54B (up 20.4% YoY) was 4.3% below our estimate of
Rs2.66B (consensus Rs2.69B). EBITDA margin of 68.5% (down 114bp) was
below our estimate of flat margins. Margin pressure was led by 150bp higher
operating expenses owing to an initial period of activity at the 60MMT coal
terminal, and higher employee costs (+30bp YoY). Other operating income was
Rs136MM (up 40%); for FY12 management has guided to ~Rs1-1.1B. Tax rate
of 6.3% in Jun-q was below estimates (10%). Although the company has
applied MAT (~20% including surcharge) to calculate tax, it availed itself of an
offsetting MAT credit of ~Rs528MM in Jun-q. Imposition of MAT ahead of
FY12 deadline appears a conservative move. Management has guided that
similar MAT credits will be used through FY12 to keep the effective tax rate
below the 10% level.
Following the results our FY12/FY13 consolidated EPS estimates are down
by 2.3% and 1.1% respectively: We adjust our FY12 estimates for lower
operating income (Rs1.1B vs. Rs1.39B earlier). We lower standalone EBITDA
by 50bp to 67.8% (down 40bp YoY) to account for near-term operating cost
pressures.
We maintain our Mar-12 SOP PT of Rs168: Our PT implies 21% upside
from the current share price. The stock is trading at ~15.4x FY13E EPS.
Implied FY13E EV/EBITDA of 13.8x at our PT is backed by estimated
consolidated EBITDA CAGR of 39.4% over FY11-15. We continue to view
MPSEZ as an attractive long-term investment. We think MPSEZ stands out
with its strong growth, RoE and cash flow profile, with a relative absence of
issues plaguing the infra sector currently (fuel, environment, funding). MPSEZ
has corrected 10% since the Karnataka Lokayukta (KL) report was published
last week. Although the KL report does not mention MPSEZ’s involvement
explicitly, the stock has corrected due to feared rub-off effect of any adverse
legal outcome on the entire group, in our view (see our 2 Aug. report). This may
continue to be a near-term overhang and keeps us Neutral on the stock. Traffic
volatility at Mundra Port is a key upside/downside risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Jun-q PAT slightly below estimate, but stock
valuations appear attractive
MPSEZ reported net sales of Rs5.16B (up 27.2% YoY), slightly ahead of
our estimate of Rs5.03B: Total cargo handled at MP in Jun-q was 15.08MMT
(up 19.5%), in line with feedback received from management earlier. Implied
realization of Rs342/MT (including SEZ income of ~Rs60mn@Rs10mn/acre)
compares favorably with our est. of Rs335/MT.
Jun-q PAT of Rs2.54B (up 20.4% YoY) was 4.3% below our estimate of
Rs2.66B (consensus Rs2.69B). EBITDA margin of 68.5% (down 114bp) was
below our estimate of flat margins. Margin pressure was led by 150bp higher
operating expenses owing to an initial period of activity at the 60MMT coal
terminal, and higher employee costs (+30bp YoY). Other operating income was
Rs136MM (up 40%); for FY12 management has guided to ~Rs1-1.1B. Tax rate
of 6.3% in Jun-q was below estimates (10%). Although the company has
applied MAT (~20% including surcharge) to calculate tax, it availed itself of an
offsetting MAT credit of ~Rs528MM in Jun-q. Imposition of MAT ahead of
FY12 deadline appears a conservative move. Management has guided that
similar MAT credits will be used through FY12 to keep the effective tax rate
below the 10% level.
Following the results our FY12/FY13 consolidated EPS estimates are down
by 2.3% and 1.1% respectively: We adjust our FY12 estimates for lower
operating income (Rs1.1B vs. Rs1.39B earlier). We lower standalone EBITDA
by 50bp to 67.8% (down 40bp YoY) to account for near-term operating cost
pressures.
We maintain our Mar-12 SOP PT of Rs168: Our PT implies 21% upside
from the current share price. The stock is trading at ~15.4x FY13E EPS.
Implied FY13E EV/EBITDA of 13.8x at our PT is backed by estimated
consolidated EBITDA CAGR of 39.4% over FY11-15. We continue to view
MPSEZ as an attractive long-term investment. We think MPSEZ stands out
with its strong growth, RoE and cash flow profile, with a relative absence of
issues plaguing the infra sector currently (fuel, environment, funding). MPSEZ
has corrected 10% since the Karnataka Lokayukta (KL) report was published
last week. Although the KL report does not mention MPSEZ’s involvement
explicitly, the stock has corrected due to feared rub-off effect of any adverse
legal outcome on the entire group, in our view (see our 2 Aug. report). This may
continue to be a near-term overhang and keeps us Neutral on the stock. Traffic
volatility at Mundra Port is a key upside/downside risk.
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