Adani Port & SEZ - Volumes disappoint - Prabhudas Lilladher

Volumes witness a sequential decline: Volumes declined 6% sequentially to 15.5m tonnes led by a drop in volumes from Tata UMPP. However on account of the Take or Pay contract with Tata UMPP, earnings for Q4 FY12 were largely inline with expectations. The company reported revenues of RsRs6.4bn, representing a 24% YoY growth and 7% QoQ decline. Margins were strong at 71.3% as the costs associated with Take or Pay revenues are marginal if the cargo volumes do not take place. PAT for the quarter stood at Rs3.38bn, 1% YoY growth and 9% QoQ growth.

On a positive note, container volumes continued its upward trajectory: clocking volumes of 5.09m tonnes as against 4.7m tonnes in Q3 FY12.

- Volumes and financials at Abbot Point disappoint: As against a Take or Pay commitment of 18m tonnes, volumes at Abbot Point stood at 11.5m tonnes. Further with the Take or Pay structured for a June year ending, the Take or Pay fees do not get captured in FY12 numbers (Jun'11-Mar'12) leading to an earnings disappointment. Revenues stood at Rs6.1bn, margins at 54% and a post tax loss of Rs50mn. Going forward, with the entire 12 months getting captured next year, we expect earnings & margins to improve.

- The 3 C's to contribute to incremental growth: From 64m tonnes in FY12, we expect volumes to scale up to 80.3m tonnes in FY13. The major contributors to growth are expected to be a) crude-on account of the new HMEL refinery commencing operations, b) coal-on account of incremental phases commencing operations at the Adani and Tata power plants and c) container-on account of Mundra gradually increasing market share.

- Valuations: Notwithstanding near term volume challenges, we remain positive on the increasing long term volume trajectory at Mundra as well as the subsidiary ports. We reiterate BUY with our SOTP based target price of Rs156.

Source : Equity Bulls

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