Adani Ports and SEZ’s (APSEZ) Q2FY16 consolidated PAT at R670 crore came in line with our estimate, boosted by ~R310 crore SEZ revenue, negating the impact of lower volumes—37MT versus ~42MT estimate. Management reiterated impact of lower coal imports on cargo volumes to be mitigated largely by coastal shipping as well as imports by coastal power plants (AEL coal trading volume growth vindicates this). We continue to believe that APSEZ will not only leverage its strong asset-based balance sheet, but also its expertise to pursue growth opportunities.
We believe APSEZ will leverage its asset portfolio and balance sheet to pursue growth opportunities, especially inorganic, which are not factored in our valuations.
Factoring in gradual cargo ramp up in some of the subsidiaries, we have cut FY16E and FY17E earnings 8.5% and 6.0%, respectively, resulting in revised SoTP-based target price of R351.
APSEZ’s consolidated cargo volume at ~36.5MT grew 4% YoY, but fell 8% QoQ due to lower coal volumes and slow ramp up at Dahej. Mundra container volumes at 732k TEUs grew 10% YoY despite tepid ExIm container market, which grew mere ~2%. Apart from gaining market share, transshipment cargo (~140k TEUs) handled at Mundra helped the company sustain such growth rates.
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