Thursday, February 9, 2012

>ADANI PORT & SEZ: Volumes disappoint; SEZ saves the day

 Results disappoint on lower volumes, SEZ saves the day: Mundra reported lower-than-expected revenues during the quarter on account of flat sequential volumes. Higher realization per tonne (+5% QoQ) on account of higher proportion of fertilizer volumes, led to port revenues increasing 4% QoQ in a amid flat volumes (-1%) in Q3 FY12. Aided by contribution from the SEZ side, where a new lease (~30 acres with Anupam MHI) was signed during the quarter, revenues increased 11% QoQ and 53% YoY to Rs6.91bn in Q3FY12.

EBITDA margins for the quarter were slightly higher-than-expected at ~69.7%, an improvement of 340bps QoQ and ~100bps YoY. However, interest cost was sharply (+70%) higher QoQ at Rs783m on account of a loss of ~Rs483m on derivative contracts (owing to the sharp depreciation in the rupee) during the quarter compared to a loss of ~Rs14 cr in Q2 FY12. Consequently, PAT stood at Rs3.1 bn, a growth of 36% YoY and 14% QoQ.

 Lower coal, crude volumes lead to flat volumes QoQ: The disappointment on the volumes front emanated from the coal and crude segments where volumes declined by 12% and 31%, respectively, on a sequential basis. Q3 witnessed a fall in volumes due to delay in commencement of HMEL refinery volumes which witnessed trial runs last quarter. Higher imported coal prices, coupled with a depreciating rupee, led to lower coal imports during the quarter. However, a strong pickup in fertilizer volumes (+47% QoQ) along with a continued growth in the container volumes (+7% QoQ) made up for the fall in the coal and crude segments, resulting in an overall flat throughput (-1% QoQ) at ~16.6mt for Q3FY12. Going forward, management expects coal volumes to start inching up again with a rebound in demand from Adani Power.

■ Valuations: We have moderated our volume assumptions, going forward, to factor in a slower pickup in coal volumes at Adani and Mundra UMPP. We continue to value MPSEZ on a DCF basis, whereby, our SOTP value now stands at Rs161/ share. Our estimate of a 21% CAGR in volumes over FY12-14, coupled with an expectation of strong free cash flow generation, going forward, leads us to retain our positive stance on the stock. We maintain ‘Accumulate’.