Volume No. 1 Issue No. 1 Adani Ports & Special Economic ... · Adani Ports and Special Economic...
Transcript of Volume No. 1 Issue No. 1 Adani Ports & Special Economic ... · Adani Ports and Special Economic...
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Nifty APSEZ
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Adani Ports and Special Economic Zone Ltd (APSEZ), established in 1998, is the largest port developer in India. Previously known as Mundra Port & Special Economic Zone Ltd, the company changed its name on January 6, 2012. The company is engaged in the business of developing, operating and maintaining the Mundra Port and Port based related infrastructure facilities, including Multi product Special Economic Zone. The group owns and operates six ports & terminals – Mundra, Dahej and Hazira in Gujarat, Dhamra in Orissa, Murmugao in Goa and Visakhapatnam in Andhra Pradesh, India. APSEZ is the country’s first multi-product port-based special economic zone.
Investment Rationale
Robust performance in Q3FY15: Driven by strong growth in cargo
volumes, APSEZ has reported a robust performance in Q3FY15, with the
consolidated total income increased by 38% to `17.01 bn as compared to `12.36
bn in the corresponding quarter last year. The consolidated net profit during the
quarter grew by 14% to `5.12 bn as compared to `4.51 bn in the corresponding
quarter last year. The growth in the net profit during the quarter was restricted
by higher interest costs and depreciation expenses on account of the
commissioning of assets like Dahej and Hazira.
We remain positive on the future growth prospects of the company given the
improvement in the macroeconomic scenario of the country. With the expected
revival in the economy, import and export activity is likely to pick up in the
coming quarters and hence will increase the cargo volume. APSEZ, being the
largest port player (in terms of cargo handling capacity of 112.8 MMT in 2014)
will benefit the most with this revival.
Mulling on expansion to augur well for APSEZ: Post the acquisition of
100% stake in Dhamra Port, the company is looking to ramp up the capacity of
the port by four fold to 100 MMT, which is expected to be completed in the next
30 months. Apart from expanding the cargo handling capacity, the expansion
will also include increasing berth strength to 13 from two at present at the
Dhamra port. The expansion will allow APSEZ to fulfill its stated vision of
becoming a 200 MMT ports business well before the year 2020.
Strong project pipeline, expansion on track: The recent commissioning
of a bulk terminal at Tuna Tekra, Kandla Port with an annual handling capacity of
over 20 MMT will help the company to further fortify its position in the port
business and cargo handling. The commissioning of the terminal will act as a
game-changer for Export Import trade of the Northwest hinterland of India.
Further, the company is looking big at the ports business and is planning to
invest `200 bn towards expanding the capacity of its Gujarat ports to 100 MMT
by 2020.
Rating BUY
CMP (`) 336.6
Target (`) 396
Potential Upside ~18%
Duration Long Term
Face Value (`) 2.0
52 week H/L (`) 358/167.4
Adj. all time High (`) 358
Decline from 52WH (%) 6.0
Rise from 52WL (%) 101.1
Beta 1.1
Mkt. Cap (`bn) 696.8
Enterprise Value (`bn) 810.0
Promoters 75.0 75.0 -
FII 18.5 17.9 0.6
DII 2.6 2.9 (0.3)
Others 3.9 4.2 (0.3)
Shareholding Pattern
Dec’14 Sep’14 Diff.
Market Data
Y/E FY13A FY14A FY15E FY16E
Revenue (`bn) 35.8 48.2 62.6 79.6
EBITDA (`bn) 23.8 29.2 38.7 49.8
Net Profit (`bn) 16.2 17.4 21.4 27.5
EPS (`) 8.0 8.3 10.3 13.2
P/E (x) 41.8 40.3 32.7 25.5
P/BV (x) 10.6 8.0 6.6 5.3
EV/EBITDA (x) 33.5 27.7 20.9 16.1
ROCE (%) 12.3 13.4 14.4 16.3
ROE (%) 25.4 19.8 20.1 20.9
Fiscal Year Ended
March 4, 2015
BSE Code: 532921 NSE Code: ADANIPORTS Reuters Code: APSE.NS Bloomberg Code: ADSEZ:IN CRG:IN
Volume No. 1 Issue No. 1 Adani Ports & Special Economic Zone Ltd
APSEZ - India’s largest multi-port operator
APSEZ is the only private sector port operator with presence across six ports in India. Mundra
port is the largest port in India and it has crossed the 100 MMT mark of cargo handling in FY14.
APSEZ’s aim is to increase annual cargo handling capacity from 112.8 MMT (million metric tons)
in 2014 to 200 MMT by 2020. Mundra SEZ is one of the largest operating port-based multi-
product special economic zones in India. Overall the company has developed and operates 10
terminals having 28 berths to handle bulk and container cargo; and 2 single point mooring
facilities at the ports of Mundra, Dahej and Hazira. The company’s Mundra port has 4 bulk
terminals having 15 berths to handle dry as well as liquid bulk cargo, 3 container terminals
having 6 berths and 2 offshore single point mooring facilities for handling crude cargo. At the
port of Dahej, the company has developed and operates a dry bulk cargo terminal having 2
berths. The company has also developed and operates 1 bulk terminal having 3 berths to handle
dry as well as liquid bulk cargo and 1 container terminal having 2 berths to handle container
cargo at the port of Hazira.
Mundra port is the largest
port in India and it has
crossed the 100 MMT mark of
cargo handling in FY14.
Indian ports & Terminals
Addition of Dhamra port – a strategic fit for the company
APSEZ in the recent past has completed the acquisition of 100% stake in the Dhamra Port
Company Limited (DPCL). With the acquisition of Dhamra Port, the company further enhanced
its portfolio and has now forayed into the Eastern Coast of India. The Dhamra port has a
capacity to handle 25 MMT (Phase-1) of cargo and it handled 14.3 MMT of cargo in FY14. After
completing the acquisition of the Dhamra Port, the company is looking to ramp up the capacity
of the port by four fold to 100 MMT, which is expected to be completed in the next 30 months.
Apart from expanding the cargo handling capacity, the expansion will also include increasing
berth strength to 13 from two at present at the Dhamra port. The expansion will bode well for
the company.
The company is looking to
ramp up the capacity of the
Dhamra port by four fold to
to 100 MMT, which is
expected to be completed in
the next 30 months.
Healthy numbers in Q3FY15
Strong topline growth on improvement in volumes: APSEZ has reported a robust performance
in Q3FY15, with the consolidated total income increased by 38% to `17.01 bn as compared to
`12.36 bn in the corresponding quarter last year driven by significant growth in cargo. The total
cargo handled by the company on a consolidated basis stood at 39 MMT in Q3FY15, an
increase of 33%, over the corresponding quarter last year. Out of which, the Mundra port
alone has handled 29 MMT cargo in Q3FY15 there by continuing its leadership as the single
largest commercial port in India. In line with strong revenue growth, the EBITDA also remain
buyout with the consolidated EBITDA surged by 34% to `10.9 bn as compared to `8.12 bn in
the corresponding quarter last year.
Higher interest and depreciation costs slowed the growth in net profit: Tracking better
performance on the revenue and EBITDA front, the consolidated net profit during the quarter
grew by 14% to `5.12 bn as compared to `4.51 bn in the corresponding quarter last year. The
growth in the net profit during the quarter was restricted by higher interest costs and
depreciation expenses on account of the commissioning of assets like Dahej and Hazira.
Q3FY15 performance stays
robust with the consolidated
total income increased by 38%
YoY to `17.01 bn.
According to the company’s management, the company has delivered another record quarter
and nine months performance on all fronts of cargo, revenue and EBIDTA growth and it
remains committed towards maintaining its growth momentum in the future by further
enhancing its focus on sales & operational excellence.
Nine monthly performance also stays robust
APSEZ has reported 19% growth in its consolidated total income to `49.97 bn in 9MFY15 as
compared to `42.07 bn in the corresponding period last year on the back of sturdy growth in
volumes. The consolidated cargo handled by the company during 9MFY15 increased by 29%
YoY to 108 MMT. The EBITDA performance also stays robust with the consolidated EBITDA
surged by 21% to `33.41 bn as compared to `27.68 bn in the corresponding period last year.
Sturdy growth in volumes
triggered 19% YoY growth in
consolidated total income in
9MFY15.
12.4 12.9 14.3
18.7
17.0
4.5 5.3 5.7 5.7
5.1
-
2.0
4.0
6.0
8.0
10.0
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14.0
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18.0
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Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15
` b
n
Total Income Net Profit
Performance trend
For private circulation only
In line with strong revenue and EBITDA performance, the consolidated net profit during the
period witnessed a significant growth of 37% to `16.54 bn as compared to `12.1 bn in the
corresponding quarter last year.
Robust volume growth across ports in Q3FY15
APSEZ has handled a record volume during Q3FY15, with the performance across all the ports
continues to be robust. The total cargo handled by the company during the quarter under
consideration on a consolidated basis stood at 39 MT, an increase of 33%, over the
corresponding quarter last year. Adani ports at Mundra handled 29 MMT cargo in Q3FY15
thereby further strengthening its dominant position as the single largest commercial port in
India. Further, the cargo handling at Hazira, Dahej and Dhamra ports improved to 1.6 MMT,
3.47 MMT and 4.4 MMT respectively in Q3FY15, according to reports. With an improving
macro-economic environment coupled with signs of improvement in cargo handling across rest
all ports should trigger volume growth ahead and would aid to the revenue growth.
Mundra port continues to witness strong volume growth
Mundra port alone has achieved a milestone in cargo handling that has crossed 100 MMT mark
by handling 101.1 MMT of cargo in FY14. The trend continues in FY15 also with the company at
Mundra handled 84 MMT cargo in 9MFY15, thereby continuing its leadership as the largest
commercial port business in India. The cargo handled by the company at the Mundra port
registered a 13% growth in 9MFY15 compared to 5% aggregate cargo growth at all major ports.
Also, in case of containers, the Mundra port handled 2.02 Million TEUs in 9MFY15 as against
1.68 Million TEU’s in corresponding to the same period last year. The containers handled at the
Mudra port witnessed a 20% growth as compared to growth of 8% aggregate growth in
container volumes at all the major ports.
Besides, in the recent past APSEZ has signed an agreement (50:50 JV) with France’s CMA CGM
Group (the world’s third largest container shipping company) to develop the fourth container
terminal at Mundra, in Gujarat, with a capacity to handle 1.3 mn TEUs (20-ft equivalent units)
annually. It will allow Adani Ports to fulfill its stated vision of handling 200 MMT of cargo well
before the year 2020. This project is expected to be completed in the next 24 months and take
Mundra’s total container handling capacity to 5.5 mn TEUs.
39.7
52.3
77.5
90.7
112.8 108.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2010 2011 2012 2013 2014 9MFY15
APSEZ has handled a record
volume during Q3FY15 and we
expect the company continue to
see improvement in cargo
handling on the back of
improving macro-economic
environment that may boost
import-export activity.
Mundra port, the largest port in
India has handled 84 MMT cargo
in 9MFY15, thereby continuing
its leadership as the largest
commercial port business in
India.
Consolidated cargo volumes trend (MMT)
Eyeing big in the container business
The company is on an expansion spree and in order to further consolidate its leadership
position in the port infrastructure sector in India. APSEZ, India's largest port developer and
part of Adani Group, has recently commissioned a bulk terminal at Tuna Tekra, Kandla Port,
further fortify its position in the port business and cargo handling. The bulk terminal at Tuna
Tekra will have handling capacity of over 20 MMT of cargo annually, with 4 berths and a
draft of 16.5 meter, which will enable larger vessels calling the port. The commissioning of
the terminal will act as a game-changer for Export Import trade of the Northwest hinterland
of India. The company said it has commissioned Tuna Tekra bulk terminal in a record time of
24 months. Apart from this, the company is also developing a Container Handing Terminal
at Ennore Port, Tamil Nadu and remains confident to complete the container terminal
project in a record time frame. APSEZ now operates in four locations in Gujarat and
operates seven port facilities across India.
Container cargo to grow at a faster pace
The container cargo growth continues to remain robust over the years for the company that
has grown at a CAGR of 24.9% during FY11-14 and the company is confident of the growth
trend to continue in the coming years. Container cargo traffic, largely dependent on
economic activity and has increased significantly in India over the past couple of years. In
order to further fortify its presence in the port industry and to make Mundra the largest
container port in the country, APSEZ recently has entered into a 50:50 Joint Venture (JV)
agreement with France’s CMA CGM Group (the world’s third largest container shipping
company) to develop a new “common user” Container Terminal, which will have an annual
capacity of handling 1.3 million TEUs. The terminal will be set up at an estimated cost of
`21,000 mn at Mundra port in Gujarat and will be the fourth container terminal at Mundra
that will add 30% to the port’s capacity. The new terminal is expected to be completed in
the next 24 months, which will take Mundra’s total container handling capacity to 5.5 mn
TEUs and will make Mundra become India’s largest container port.
Key Risks
Any unexpected decline in traffic at ports: Since cargo at ports is contingent on
international trade (Imports & Exports), any slowdown in it could affect Mundra
Port as well.
Lower cargo volume growth: Slower-than-expected volume growth or any
slowdown in container cargo growth due to a decline in the economic activity could
have a negative impact on sales and profitability.
Regulatory risk regarding SEZs: The existing SEZ policies and benefits outlined by
the government that aims to promote exports are being continually reviewed. Any
changes in the form of reversal of current tax benefits to units under the SEZ
territory will significantly undermine the incentives for industries to set up units in
the SEZ.
The bulk terminal at Tuna Tekra
will have handling capacity of
over 20 MMT of cargo annually.
In order to further fortify its
presence in the port industry and
to make Mundra the largest
container port in the country,
APSEZ recently has entered into
a 50:50 Joint Venture (JV)
agreement with France’s CMA
CGM Group.
Profit & Loss Account (Consolidated)
Y/E (`mn) FY13A FY14A FY15E FY16E
Share Capital 4,035 4,168 4,168 4,168
Reserve and surplus
59,928 83,513 102,530 127,602
Minority Interest 1,423 1,437 1,465 1,495
Loans 106,622 116,940 130,142 134,132
Other long term liabilities
5,939 7,336 8,069 8,876
Deferred tax Liability
5,530 6,745 6,745 6,745
Provisions 4,043 6,943 8,501 9,991
Current Liabilities 23,077 19,690 22,776 26,352
Capital Employed 210,596 246,771 284,397 319,360
Fixed assets 142,933 151,475 160,563 170,197
Goodwill on consolidation
404 404 404 404
Long term loans & advances
11,511 30,928 32,165 34,095
Non-current Investments
771 575 575 575
Deferred tax Assets
244 - - -
Current Assets 50,235 54,440 80,087 102,113
Other non-current assets
4,499 8,950 10,604 11,977
Capital Deployed 210,596 246,771 284,397 319,360
Y/E (`mn) FY13A FY14A FY15E FY16E
Total Income 35,766 48,240 62,619 79,652
Operating Expenses
12,007 19,036 23,921 29,869
EBITDA 23,760 29,204 38,699 49,782
Other Income 2,644 6,836 5,736 5,966
Depreciation 4,220 6,495 7,794 9,353
EBIT 22,185 29,545 36,641 46,396
Interest 5,418 9,768 11,721 14,065
PBT 16,766 19,777 24,920 32,330
Tax 1,231 2,367 3,468 4,821
Loss/gain on account of discontinued operations
853 - - -
PAT 16,388 17,410 21,453 27,509
Minority Interest
156 14 14 15
Net Profit 16,232 17,396 21,439 27,494
Y/E FY13A FY14A FY15E FY16E
EBITDA Margin (%) 66.4 60.5 61.8 62.5
EBIT Margin (%) 62.0 61.2 58.5 58.2
NPM (%) 45.4 36.1 34.2 34.5
ROCE (%) 12.3 13.4 14.4 16.3
ROE (%) 25.4 19.8 20.1 20.9
EPS (`) 8.0 8.3 10.3 13.2
P/E (x) 41.8 40.3 32.7 25.5
BVPS(`) 31.7 42.1 51.2 63.2
P/BVPS (x) 10.6 8.0 6.6 5.3
EV/Operating Income (x) 22.3 16.8 12.9 10.1
EV/EBITDA (x) 33.5 27.7 20.9 16.1
Key Ratios (Consolidated)
Balance Sheet (Consolidated)
Valuation and view
We believe APSEZ will sustain its growth momentum on the
back of its strong fundamentals, unique asset profile, robust
cargo volume growth, strategic customer relations and
increasing traction in the domestic market. The contribution
from the Dhamra port and the pick-up of volume from Dahej
and Hazira ports will further boost its market share (in terms of
cargo handled). The revival in the domestic economy would
provide further fillip to the import and export activity in the
coming quarters that would result in an increase in the cargo
volume. With APSEZ, being the largest port player (with cargo
handling capacity of 112.8 MMT in FY14), we expect the
company to benefit the most with this revival. Further, the
capacity expansion at both – Mundra and Dhamra is likely to
aid volume and profitability going ahead.
At a CMP of `336.6, APSEZ is currently trading at EV/EBITDA of
20.9x FY15E and 16.1x FY16E. Considering the company’s
strong fundamentals, we recommend ‘BUY’ with a target price
of `396, which implies potential upside of ~18% to the CMP
from 1 year perspective.
For private circulation only
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in India by Funds India. The information in the document has been compiled by the research department. Due care has been taken in
preparing the above document. However, this document is not, and should not be construed, as an offer to sell or solicitation to buy any
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