Buy Adani Ports; target of Rs 150: Emkay

“APSEZ delivered solid 2Q performance as standalone EBITDA at Rs 4.85bn grew a robust 28% yoy, ahead of our estimates of Rs 4.5bn, led by higher than expected cargo volumes. EBIDTA margins stood at 69.5% came in line and expanded by 510bps yoy. Revenues at Rs 6.98bn v/s exp of Rs 6.5bn +18.7% yoy led by volume beat as cargo volumes at 20.4MMT grew a healthy +15%yoy. Dry bulk (9.9 mt) grew a robust 41%yoy, while container cargo (6.2 mt) grew +16% yoy. Blended realization at Rs 342/tone came in line. APAT came in ahead of exp. at Rs 3.7bn +35.9% yoy v/s exp. of Rs 3bn - Significantly higher other income (Rs 973mn v/s our expectation of Rs 300mn) fuelled APAT beat. Other income includes Rs 500mn of SEZ income as well. Adjusted Interest cost at Rs 911mn increased 96.2%yoy higher than estimates of Rs 800mn led by higher net debt of Rs64 bn at Sept-12 (March -12 Debt of Rs51 bn).”

“Consolidated Revenue came ahead of exp. at Rs 10.2 bn + 19% yoy v/s exp. Rs 9.9bn led by out performance of Mundra port. Adani ports in Q2FY13 handled overall cargo of 25.7mn which included 3.67mt -2.2%yoy at Abbot point and ~1.5mt at Dahej port. EBITDA came in at Rs 6.4bn +24.5% yoy v/s exp. Rs 6.7bn, EBITDA margins came in sharply lower at 62.6% v/s exp of 68.2%. APAT came in significantly ahead of exp. at Rs 2.75bn -4%yoy v/s exp. Rs2.25bn led by higher other income (Rs 751mn v/s our expectation of Rs 223mn). Finance cost stood at Rs 2.8bn v/s exp Rs2.7bn adjusting for derivative gains.”

“Consolidated results implied a net subsidiaries loss of Rs1.5 bn for Q2FY13, nearly v/s Rs 1.4bn in Q1FY13, despite an improvement in Abbot Port profitability (net loss of Rs540 mn in 2QFY13 versus a loss of Rs1.35 bn in 1QFY13 as highlighted by the management in conference call). Overall implied EBITDA of other subsidiaries stood at Rs 1.2bn -27%qoq. ADSEZ reported a strong increase in standalone net debt by Rs18.5 bn from Mar 31, 2012 levels to Rs64.5 bn at H1FY13, Simultaneously the money deployed in short-term Loans & Advances has risen sharply by Rs 10.5bn to Rs 12.2bn raising questions on wasteful deployment of resources. We await clarifications on the nature of advances. Retain buy with a TP of Rs 150,” says Emkay Global Financial Services research report.

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