Adani Ports & SEZ Ltd (APSEZ) owns & operates India's largest Private Sector Port at Mundra in Gujarat. Initially it was a primarily a single Port company, but over the recent years the company has expanded it's presence across 5 different locations on the Western Coast and another 3 locations on the Eastern Coast. Most of the 7 locations, other than Mundra, are either recent acquisitions or recent implementations, and are much smaller in size compared to Mundra. They are either standalone Ports or Terminals near some Port. But the company will look to expand their capacities as per demand. Mundra on the other hand is a large Port integrated with a Special Economic Zone with all infrastructure provided by APSEZ. The company has even laid it's own 70+ kilometres Private Rail Line connecting the Mundra Port to the nearest Indian Railway junction. Thanks to the excellent Road & Rail connectivity of Mundra Port and the extremely efficient operations, Mundra Port has seen the Cargo Handling volume increase over the recent years. Be it Coal Imports or Automobile exports or Capital Goods imports or Textile Exports or import/export of any other goods, companies from not just Gujarat, but from anywhere in Nothern or Central states of India, prefer to move their goods via Mundra Port. Gujarat is also rapidly becoming the preferred destination for setting up Automobile manufacturing units with Ford & Suzuki also investing to setup large units in the state. A substantial part of production from these units is also expected to be exported and hence the Automobile exports from Mundra Port will increase substantially in the coming years.
Eventhough the Mundra Port & SEZ comprises majority of APSEZ's Revenues & Profits currently, the contribution of other ports & terminals to the company's numbers will increase substantially in the coming years. Most of these have joined the company recently and hence their impact on APSEZ's Revenues & Profits will be seen in the coming quarters. India is large country and with the economy picking up pace, there will be increased activity across the country and hence there will be increased Imports & Exports in all regions of the country. Hence APSEZ's strategy of having presence across multiple locations, both on Eastern & Western Coast, will pay huge dividends in the coming years. APSEZ has already reached a stage where the operational Cash Flows are healthy and the company's management has shown ample aggression in raising resources when needed to expand capacity or presence.
After plateauing for about a year, APSEZ's Total Income has started on the growth path again, which is clearly visible from the charts. The same is visible from the EBITDA, Net Profit & EPS charts. A part of the growth in the recent 2 quarters is the acquisition of Dhamra Port in Orissa on the Eastern Coast. APSEZ acquired Dhamra Port from the Tata Steel and L&T JV for about Rs.5500 crores in June'2014. Dhamra Port had a capacity to handle 25 MT of Cargo per annum and APSEZ is slated to implement the 2nd phase of expansion to take it to 100 MT per annum. In a year or two, Dhamra Port will be APSEZ's most important port after Mundra. First it is on the Eastern Coast, opening up access to trade with South-East Asian countries as well as Australia. Adani Group plans to import Coal from Australia and Dhamra Port could play an important role in this trade.
Valuation: Going by the expansion plans & scope for increased capacity utilisation, APSEZ can easily post a Y-o-Y growth of over 20% very easily in the coming few years. The company has already touched the $1 billion in T-T-M revenues with T-T-M Profits of close to Rs.2200 crores and Cash Profit of close to Rs.3000 crores. At the current price of just over Rs.300 per share, APSEZ commands a Market Cap of around Rs.62000 crores. As per the recent scheme of arrangement between all the Adani Group companies, all Port related businesses will be consolidated under APSEZ. A few Port-related activities are currently under Adani Enterprises Ltd, the parent company. Even these will be transferred to APSEZ under this arrangement. Even the shareholding structure will change due to this arrangement. Adani Enterprises Ltd (AEL) (Promoter Group) owns 75% of APSEZ currently. If I have understood the scheme correctly, then this 75% stake of AEL will get cancelled and APSEZ will issue shares to shareholders of AEL in the ratio of about 1.41 shares of APSEZ for every 1 share of AEL. Post the implementation of this scheme, the number of issued shares of APSEZ will remain about the same. The Promoter holding will drop to about 55% in APSEZ. The Revenues & Profit numbers will increase slightly due to this rearrangement.
Going by the aggressive growth plans, APSEZ will most probably continue to enjoy high P/E ratings. At present the P/E rating is about 30. There are some Logistics companies which trade at P/E rating of over 40. I won't be surprised if APSEZ is re-rated to a higher P/E rating in the future months. Even if it continues to be at this P/E rating, the stock could very well give annual returns of over 20% per annum, in line with the growth in it's revenues & profits. I am positive on the prospects of growth for APSEZ.
Eventhough the Mundra Port & SEZ comprises majority of APSEZ's Revenues & Profits currently, the contribution of other ports & terminals to the company's numbers will increase substantially in the coming years. Most of these have joined the company recently and hence their impact on APSEZ's Revenues & Profits will be seen in the coming quarters. India is large country and with the economy picking up pace, there will be increased activity across the country and hence there will be increased Imports & Exports in all regions of the country. Hence APSEZ's strategy of having presence across multiple locations, both on Eastern & Western Coast, will pay huge dividends in the coming years. APSEZ has already reached a stage where the operational Cash Flows are healthy and the company's management has shown ample aggression in raising resources when needed to expand capacity or presence.
After plateauing for about a year, APSEZ's Total Income has started on the growth path again, which is clearly visible from the charts. The same is visible from the EBITDA, Net Profit & EPS charts. A part of the growth in the recent 2 quarters is the acquisition of Dhamra Port in Orissa on the Eastern Coast. APSEZ acquired Dhamra Port from the Tata Steel and L&T JV for about Rs.5500 crores in June'2014. Dhamra Port had a capacity to handle 25 MT of Cargo per annum and APSEZ is slated to implement the 2nd phase of expansion to take it to 100 MT per annum. In a year or two, Dhamra Port will be APSEZ's most important port after Mundra. First it is on the Eastern Coast, opening up access to trade with South-East Asian countries as well as Australia. Adani Group plans to import Coal from Australia and Dhamra Port could play an important role in this trade.
Valuation: Going by the expansion plans & scope for increased capacity utilisation, APSEZ can easily post a Y-o-Y growth of over 20% very easily in the coming few years. The company has already touched the $1 billion in T-T-M revenues with T-T-M Profits of close to Rs.2200 crores and Cash Profit of close to Rs.3000 crores. At the current price of just over Rs.300 per share, APSEZ commands a Market Cap of around Rs.62000 crores. As per the recent scheme of arrangement between all the Adani Group companies, all Port related businesses will be consolidated under APSEZ. A few Port-related activities are currently under Adani Enterprises Ltd, the parent company. Even these will be transferred to APSEZ under this arrangement. Even the shareholding structure will change due to this arrangement. Adani Enterprises Ltd (AEL) (Promoter Group) owns 75% of APSEZ currently. If I have understood the scheme correctly, then this 75% stake of AEL will get cancelled and APSEZ will issue shares to shareholders of AEL in the ratio of about 1.41 shares of APSEZ for every 1 share of AEL. Post the implementation of this scheme, the number of issued shares of APSEZ will remain about the same. The Promoter holding will drop to about 55% in APSEZ. The Revenues & Profit numbers will increase slightly due to this rearrangement.
Going by the aggressive growth plans, APSEZ will most probably continue to enjoy high P/E ratings. At present the P/E rating is about 30. There are some Logistics companies which trade at P/E rating of over 40. I won't be surprised if APSEZ is re-rated to a higher P/E rating in the future months. Even if it continues to be at this P/E rating, the stock could very well give annual returns of over 20% per annum, in line with the growth in it's revenues & profits. I am positive on the prospects of growth for APSEZ.
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