KR Choksey maintains buy on Adani Ports & SEZ Ltd with target price of Rs.145

Adani Ports & SEZ Ltd - Mormugao Port Update

Home ministry bars Adani Port from participating in port projects on security grounds

Adani Port has been denied security clearances for the coal import terminal at the Mormugao port in Goa. Adani port has a mandate to develop 12 mn ton coal terminal with capex of Rs 400 crore on BOT basis with the concession period of 30 years. The company has 20% revenue sharing tie up with port trust and expected to commence operations in FY13E.

Impact on Revenue & Valuation:

APSEZ has already has invested Rs 100 crore equity and Rs 260 crore of debt in order to develop this project.

Management indicated more than 50% of project work is finished and rest is in progress.

Loss in revenue ~2.5% of total revenue in case of cancellation of Mormugao project.

In our valuation, Mormugao port added Rs 1.2 / share value. In extremely adverse conditions, company has to knock out Rs 100 crore from balance sheet as it has invested equity and valuation will fall by meagerly Rs 1.2 per share. We maintain our Buy rating on the stock with the target price of Rs.145 per share, implying an upside of 34%.

Source : Equity Bulls

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