Buy Essar Ports; target of Rs 107: ICICIdirect.com

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Buy Essar Ports; target of Rs 107: ICICIdirect.com

ICICIdirect.com is bullish on Essar Ports and has recommended buy rating on the stock with a target of Rs 107 in its February 6, 2012 research report.

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ICICIdirect.com is bullish on Essar Ports and has recommended buy rating on the stock with a target of Rs 107 in its February 6, 2012 research report.

"Essar Ports (EPL) was demerged from Essar Shipping and Ports Ltd (ESPLL) in June 2011. The existing company operates only the port business. For Q3FY12, EPL reported a stable performance. Revenues were flattish on QoQ basis and declined by 1% to Rs 272 crore while net profit increased by 10% to Rs 45.0 crore. EBITDA declined by 5% to Rs 214.4 crore due to a 344 bps decrease in EBITDA margin to 78.9%. Revenues and EBITDA have been subdued during Q3FY12 owing to shutdown by Essar Oil to expand its refinery to 18 million metric tonne per annum (MMTPA)."

"During Q3FY12, volumes handled on a QoQ basis increased by only 2% to 9.94 million metric tonne (MMT). Average realisation increased to Rs 237/tonne in FY12 from Rs 185/tonne in FY11. In Q3FY12, Vadinar handled 6.95 MMT cargo as against 6.79 MMT in Q2FY12 whereas Hazira handled 2.99 MMT of cargo in Q3FY12 against 2.94 MMT in Q2FY12. For 9MFY12, total volume of cargo handled stood at 30.87 MMT vs. 29.35 MMT in 9MFY11 with Vadinar handling 22.15 MMT in 9MFY12 against 22.71 MMT in 9MFY11 and the remaining volumes being contributed by Hazira port. EPL's capacity expansion, which has been aligned to anchor customers growth plan, is slated to increase from 88 MMT at present to 158 MMT by Q4FY14 (earlier planned completion date was Q4FY13). Paradip CQ3 berth with capacity of 16 MMT is expected to go on stream by Q1FY13 (earlier planned completion date was Q4FY12), which would boost cargo volumes, going ahead."

"The company enjoys significant revenue visibility on account of long-term take or pay agreements with its anchor clients. Most of the projects are progressing well and completion of Paradip CQ3 berth would generate higher volumes and catalyse growth in revenue and profitability. We expect significant value creation as new capacities get commissioned and cargo traffic gains traction over the next couple of years. We have valued the company on DCF basis with a target price of Rs 107," says ICICIdirect.com research report.     

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