Buy Adani Port & SEZ - Prabhudas Lilladher

Coal volumes to scale up: With the coal terminal operational since Q4FY11, volumes are likely to witness strong growth. Notwithstanding current issues surrounding the price of imported coal, the Adani Power plant and Tata UMPP volumes are likely to scale up to a level of ~28m tonnes by FY15 from the current 8m tonnes in FY12. Overall, total port volumes are expected to more than double in the same period from FY11 levels of ~51m tonnes, largely led by coal, crude and container volumes.

Utilizations to improve at container terminal: The container terminals at Mundra are currently operating at 50% utilizations levels. With the strong growth in container traffic, we expect utilizations to improve. Besides, the company is further looking at setting up additional container terminals at Mundra to tap future growth in the segment.

Commencement of HMEL refinery to boost crude volumes: With the ~9 mt HMEL refinery commencing operations in the last week of March 2012, crude volumes are likely to witness a strong pickup in FY13, we expect the refinery to contribute ~5-6 mt of additional crude volumes at the port in FY13.

Developing new port assets: The company commenced operations at its Dahej bulk terminal during FY11 which have scaled up quite strongly. In 1H FY13, volumes at Dahej stood at ~3mt. HAzira also commenced trial runs in Q2 FY13 ahead of schedule. Besides, it is also developing a terminal at Mormugao and Vishakapatnam. Also, with the acquisition of Abbot point coal terminal, Mundra has entered the international stage.

Valuations: Our SOTP for the company stands at Rs165, of which 76% is contributed by the Mundra asset, 8% contributed by Abbot Point and the remaining by the SEZ as well as the other Indian ports.

Source : Equity Bulls

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