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UBS Investment Research
Essar Ports
S trong Q1
Event: Q1FY12 results beating consensus estimates
Essar Ports (EPL) reported strong Q1FY12 results, ahead of consensus: Revenue
came at Rs.2.75bn, up 61% yoy (UBS-e Rs.2.9bn, Cons. Rs.2.6bn). Avg.
realization increased 27% yoy to Rs.220/t due to increase in tariff rates. Revenue at
Vadinar and Hazira increased 49% and 106% resp. Volume at 11.2 mmt was up
14% yoy. Billed volume (based on take or pay contract) was higher at 12.7mmt.
Impact: Substantial increase in margins
EBITDA margins in Q1FY12 increased to 79% from 73% in prior quarter due to
increase in volumes and realizations. Vadinar operations EBITDA margins
increased to 82.5% from 74% in prior quarter mainly due to increase in storage
revenue (attracts higher tariff rates). Margins at Hazira were at 71% up from 68%
in Q1FY11 due to increase in vols. and better tariffs.
Action: Maintain our estimates, reiterate Buy
Post strong Q1, we maintain our current estimates and Buy rating. Mgmt. expects
margins to range in 75-79% going forward. We maintain our FY12 margin
estimate at 74% (72% in FY11). Mgmt. expects Paradip Iron ore port (included in
our valuation) to be operational by Q4FY12. Other projects are still awaiting
regulatory clearances.
Valuation: Continue to trade at attractive multiples
We base our valuation on sum-of-the-parts methodology and value each port
separately using DCF. The stock is currently trading at attractive valuation of 1x
and 8.6x P/B and EV/EBITDA FY13E.
Essar Ports
Essar Ports is the second-largest private port operator in India. It operates as a
captive port for the Essar Group companies; Essar Group owns 84% of Essar
Ports . Essar Ports has an operational capacity of 88mt as at the beginning of
FY12 at the Vadinar and Hazira ports. Vadinar (capacity: 58mt) handles crude
and petroleum bulk cargo for Essar Oil, while Hazira (30mt) handles iron ore
and coal for Essar Steel.
Statement of Risk
We believe the key risks for Essar Ports include: a delay in getting regulatory
clearances for port expansion; dependency on a few large customers to generate
revenue; and a slower ramp up of the third party business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Essar Ports
S trong Q1
Event: Q1FY12 results beating consensus estimates
Essar Ports (EPL) reported strong Q1FY12 results, ahead of consensus: Revenue
came at Rs.2.75bn, up 61% yoy (UBS-e Rs.2.9bn, Cons. Rs.2.6bn). Avg.
realization increased 27% yoy to Rs.220/t due to increase in tariff rates. Revenue at
Vadinar and Hazira increased 49% and 106% resp. Volume at 11.2 mmt was up
14% yoy. Billed volume (based on take or pay contract) was higher at 12.7mmt.
Impact: Substantial increase in margins
EBITDA margins in Q1FY12 increased to 79% from 73% in prior quarter due to
increase in volumes and realizations. Vadinar operations EBITDA margins
increased to 82.5% from 74% in prior quarter mainly due to increase in storage
revenue (attracts higher tariff rates). Margins at Hazira were at 71% up from 68%
in Q1FY11 due to increase in vols. and better tariffs.
Action: Maintain our estimates, reiterate Buy
Post strong Q1, we maintain our current estimates and Buy rating. Mgmt. expects
margins to range in 75-79% going forward. We maintain our FY12 margin
estimate at 74% (72% in FY11). Mgmt. expects Paradip Iron ore port (included in
our valuation) to be operational by Q4FY12. Other projects are still awaiting
regulatory clearances.
Valuation: Continue to trade at attractive multiples
We base our valuation on sum-of-the-parts methodology and value each port
separately using DCF. The stock is currently trading at attractive valuation of 1x
and 8.6x P/B and EV/EBITDA FY13E.
Essar Ports
Essar Ports is the second-largest private port operator in India. It operates as a
captive port for the Essar Group companies; Essar Group owns 84% of Essar
Ports . Essar Ports has an operational capacity of 88mt as at the beginning of
FY12 at the Vadinar and Hazira ports. Vadinar (capacity: 58mt) handles crude
and petroleum bulk cargo for Essar Oil, while Hazira (30mt) handles iron ore
and coal for Essar Steel.
Statement of Risk
We believe the key risks for Essar Ports include: a delay in getting regulatory
clearances for port expansion; dependency on a few large customers to generate
revenue; and a slower ramp up of the third party business.
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