Action: Retain Buy on strong 1QFY14 results
Adani Port’s 1QFY14 operating performance was once again ahead of our
as well as the Street’s estimates due to higher-than-expected revenue
growth. While a large part of the revenue beat was driven by a one-off
income from the transfer of CT3 to its own JV, even on an adjusted basis
revenue was ahead of consensus estimates by 6%. Volume growth,
though, was slightly lower than our expectations, but was still up 35% y-y
at a time when other ports have been reporting a negative- to-flattish trend
at best. Too many adjustments make this quarter’s true margins difficult to
read, although we estimate that it is still likely at ~70% levels. With the
core business remaining strong, we remain positive on the stock and
expects the company to deliver ~25% earnings CAGR over FY13-15F as it
should continue to gain market share due to capacity constraints at major
ports. Further, its smaller ports (Dahej and Hazira) have also started
delivering good volumes and profits. Thus, we continue to prefer ADSEZ
as our top India infrastructure play.
Catalysts: Continued market share gain and a softer rate cycle
Continued strong momentum in traffic growth and the softer interest rate
cycle are key tailwinds for the stock, in our view.
Valuation: At ~13.0x stand-alone FY15F EPS of INR11.06, the stock
offers value; upside potential of 33%
We maintain Buy on the stock as it is trading at an attractive valuation of
13.0x stand-alone FY15F EPS of INR11.06, which is unjustified given its
strong earnings growth and ROE profile. Our TP of INR187 offers an
upside potential of 33%.
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Adani Port’s 1QFY14 operating performance was once again ahead of our
as well as the Street’s estimates due to higher-than-expected revenue
growth. While a large part of the revenue beat was driven by a one-off
income from the transfer of CT3 to its own JV, even on an adjusted basis
revenue was ahead of consensus estimates by 6%. Volume growth,
though, was slightly lower than our expectations, but was still up 35% y-y
at a time when other ports have been reporting a negative- to-flattish trend
at best. Too many adjustments make this quarter’s true margins difficult to
read, although we estimate that it is still likely at ~70% levels. With the
core business remaining strong, we remain positive on the stock and
expects the company to deliver ~25% earnings CAGR over FY13-15F as it
should continue to gain market share due to capacity constraints at major
ports. Further, its smaller ports (Dahej and Hazira) have also started
delivering good volumes and profits. Thus, we continue to prefer ADSEZ
as our top India infrastructure play.
Catalysts: Continued market share gain and a softer rate cycle
Continued strong momentum in traffic growth and the softer interest rate
cycle are key tailwinds for the stock, in our view.
Valuation: At ~13.0x stand-alone FY15F EPS of INR11.06, the stock
offers value; upside potential of 33%
We maintain Buy on the stock as it is trading at an attractive valuation of
13.0x stand-alone FY15F EPS of INR11.06, which is unjustified given its
strong earnings growth and ROE profile. Our TP of INR187 offers an
upside potential of 33%.
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