Adani Ports and SEZ - Sedate Quarter; Result Update Q3FY15 :: Edelweiss, report

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Adani Ports and SEZ’s (APSEZ) Q3FY15 consolidated PAT adjusted for INR688mn of tax reversal stood at INR4.4bn lower than ours/consensus estimate of ~INR5.0bn. While INR9.6bn EBITDA was in line, drop in treasury income and higher depreciation costs impacted profits. While the ports of Dahej, Hazira and Dhamra witnessed traction, Vizag and Goa are yet to see volume scale up. However, an improving macro-economic environment should lead to growth across APSEZ’s port portfolio. The company’s long term growth story remains intact, but the stock is quoting at rich valuations.

PAT disappoints on higher fixed cost and lower treasury income

Cargo volume of 28.72MT (8% YoY growth), EBITDA of INR6.5bn at the standalone Mundra port and consolidated cargo of 38.86MT (33% YoY growth), EBITDA of INR9.6bn (margin of 62% versus estimated 60%) were in line with our expectation. However, higher-than-expected depreciation costs (owing to capitalisation of projects) and drop in treasury income (sequential dip from INR2.1bn to INR1.55bn) resulted in lower-than-estimated consolidated PAT of INR4.4bn (adjusted for tax write-back of INR688mn). Other ports continued to deliver robust cargo volumes (Dahej 3.47MT up 107% YoY, Hazira 1.59MT 69% YoY growth, Dhamra 4.39MT) and profitability.

Monetisation of SEZ land to gather pace

Management remains optimistic on monetisation of the SEZ land parcel following enquiries post the Government of India’s ‘Make in India’ manufacturing push. Pipeline for the same including land for projects of IOCL, LNG terminal and CT5 remains robust and is expected to witness traction in ensuing quarters.

LINK
https://www.edelweiss.in/research/Adani-Ports-and-SEZ--Sedate-Quarter;-Result-Update-Q3FY15/28150.html