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Mundra Port & SEZ – FIIs Bullish

May 27, 2010

Mundra Port and SEZ is the developer and operator of
India’s largest & fastest growing private sector ‘landlord’ port. MPSEZ’s asset portfolio is planned to synergize its core port operations and offer end-to-end services on the logistics value chain. ICD + container rail operations will serve as feeders to the port, and SEZ growth should help drive cargo traffic volumes.

Besides potential for scalability at MP+SEZ, the company is actively bidding and developing new ports/terminals in India – areinvestment of cash into the core business. MPSEZ handled 10.5mt in Q4FY10 (+10% y/y), led by container tonnage (+39% y/y to 3.2mt from 2.3mt) and POL (+27% y/y to 1.8mt from 1.4mt). Coal volumes declined 17% y/y to 2.2mt. In FY10, total cargo is up 13% y/y to 40.3mt.

Mundra Port (MP) and contiguous SEZ, would result in: (A) 42% PAT CAGR over next 3-years, (B) surge in RoE to 34% and FCF yield to 6.6% by FY13, making it an effective cash cow. MP is expected to surpass Kandla in cargo volumes to become India’s largest port by FY15.

Sum of the Parts Valuation of Mundra Port & SEZ
Mundra Port 588
Mundra SEZ 88
Dahej Port (solid cargo port terminal) 27
Mormugao Port 6
Adani Logistics 25
Total Rs 734

Mundra Port is expected to report an EPS of Rs 23 and 34 for FY 11 and FY 12 respectively. JP Morgan has a BUY Rating with a Target of Rs 750 while UBS has target of Rs 755.

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