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Mundra Port & SEZ – Large Deals Ahead

November 5, 2009

MPSEZ 2QFY10 recurring PAT grew +22%YoY despite slow growth in port income +5%YoY on rebound in high margin SEZ income +41% & 30% lower tax on SEZ benefit on port income. Adani Power has scaled-up its Mundra Project by 70% to 7.9GW, which will drive long-term assured volume for MPSEZ’s new coal terminal.

Mundra Port was one of the few Asian ports to report 2QFY10 cargo volume growth of +9%YoY to 10.1mmT led by liquid cargo +55% and crude cargo +43%, Coal cargo +19% despite Minerals & other cargo -57% and Fertilizer cargo -35%. Rec. PAT at Rs1.7bn was +22%YoY led by 11% growth in Revenue, 193bps YoY improvement in EBITDA margin and 30% lower tax incidence on notification of port as an SEZ.

A scaleable and deep draft port on the western coast, a low-cost 18k acres of contiguous land bank – India’s largest port-linked SEZ – and un-leveraged balance sheet (net D/E 0.4x),

EPS & SOTP Valuation of Mundra Port SEZ:

MPSEZ is expected to report an EPS of Rs 9.46 and 14.61 for fy10 and fy11 respectively, according to Citi.

ENAM – 17.9 and 26.7 for FY10 and FY11 respectively – Quite BULLISH, isn’t it ?

Edelweiss- 15.3 and 20 for fy10 and fy11 respectively.

UBS – 12.65 and 16.85 for fy10 and fy11

BOFA_Merrill – expects it to report an EPS of Rs 13.46 and 18.21 for fy10 and fy11 respectively. Further SOTP is pegged as follows,
Port Business – 514 per share on DCF basis at CoE of 12.4% for 50 years concession period
SEZ – 111
Dahej Port – 39
Others – 6 Totally – Rs 670 / share

Analysts vary a lot in their expectations. Anyway, HOLD if you are already doing so.

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