MUNDRA PORT & SEZ (MPSEZ) Research Report: Kotak Securities

Kotak Securities is bullish on MUNDRA PORT & SEZ (MPSEZ) and has recommended a BUY with the following investment rationale:

MUNDRA PORT & SEZ (MPSEZ) reported decent set of Q2FY11 results which are marginally below our estimates on account of one time charges of Rs.300 mn related to handling infrastructure which could not be capitalized.

-Port volumes of MUNDRA PORT & SEZ (MPSEZ) up 24.4% on YoY basis to 12.6 MMT as against growth of just 1.2% for all the major ports in India

– Container volumes of MUNDRA PORT & SEZ (MPSEZ) up sharply 37.8% on YoY basis to 3.1 lakh TEU q Maintain FY11 earning estimates with EPS of Rs.4.6

– Introduce FY12 earning estimates of MUNDRA PORT & SEZ (MPSEZ) with EPS of Rs.6.0

– Due to 7% upside potential from current levels we upgrade MUNDRA PORT & SEZ (MPSEZ) to ACCUMULATE with increased SOTP based price target of Rs.176 (Rs.166 earlier) Price target of MUNDRA PORT & SEZ (MPSEZ) increased to Rs.176 We continue to value MUNDRA PORT & SEZ (MPSEZ) on SOTP method of valuation. We have shifted the valuation base to FY12E. Accordingly we have also revised SOTP based price target upwards to Rs.176 (Rs.166 earlier).

Recommendation and Valuation

At the current market price of Rs.164, the stock of MUNDRA PORT & SEZ (MPSEZ) trades at 6.6x book value, 27.3x earnings and 22.1x cash earnings based on FY12E.

– We feel the stock of MUNDRA PORT & SEZ (MPSEZ) looks attractive if we consider it on SOTP. This is due to its integrated business model coupled with superior infrastructure consisting of multi cargo port, SEZ, Airport, Rail and Road connectivity. Also the industries in the surrounding SEZ would provide steady flow of cargo to the port. This would ensure steady growth in volume of cargo handled at the port by MUNDRA PORT & SEZ (MPSEZ).

-Due to 7% upside potential from current levels we upgrade MUNDRA PORT & SEZ (MPSEZ) from REDUCE to ACCUMULATE with revised SOTP based price target of Rs.176.