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Sunday, January 23, 2011

MUNDRA PORT & SEZ : A VALUE BUY

Scrip Code: 532921 / MUNDRAPORT
CMP:  Rs. 140.00; Buy at Rs.130 - Rs.135; Target: Rs. 176.00; Market Cap: Rs. 28,047.51 cr. 52 Week High/Low: Rs. 185.25 / Rs. 114; Total Shares: 200,33,94,100 shares; Promoters : 163471449 shares – 77.22 %; Total Public holding :48206111 shares – 22.77 %; Book Value: Rs. 17.41; Face Value: Rs. 2.00; EPS: Rs. 3.89; Div: 40 %. P/E: 35.98 times; Ind P/E: 23.14; EV/EBITDA: 28.00

Total Debt: Rs. 3,706.25 cr; Enterprise Value: Rs. 30,671.84 cr

Mundra Port and Special Economic Zone (MPSEZ) is one of India’s leading private ports with a current cargo handling capacity of 70mt. In addition, the company will install another 65mt of cargo handling capacity in the next 12 months. Moreover, MPSEZ has 24,000 acres of land, of which 16,000 acres have been notified as SEZ land.

Well set to benefit from expected rise in external trade Mundra Port and SEZ’s (MPSEZ) port infrastructure is amongst the best in India, which should help it capitalise on the expected rise in external trade. In the next few years, sharp rise in coal traffic will help MPSEZ post a 35% CAGR in traffic handled at the port over FY10−FY13E, which will lead to a 35% CAGR in its revenues over this period. It is also expect land sale in the SEZ area to pick up, although clarity on the tax treatment for the SEZ remains an overhang. The March ’12 target price stands at Rs 175/sh, which comprises Rs 122/sh for the Mundra port, Rs 34/sh for the SEZ, Rs 10/sh for other port concessions and Rs 8/sh for liquid investments and cash. Potential opportunities for port development in India and international geographies can lead to further value creation. Initiate BUY for MPSEZ. Port capacity will nearly double over next one year: MPSEZ’s port infrastructure is one of the best in India with deep draft, excellent road/rail connectivity, proximity to north India (as against Mumbai-based ports) and a large storage area. Currently, MPSEZ has a handling capacity of 70mn tonnes (mt) with a 15mt single point mooring (SPM), 25mt bulk and 30mt container cargo capacities. It will add another 65mt in the next 12 months—50mt of the integrated coal terminal and a 15mt SPM facility (referred to as SPM-II). We are also building in another 110mt capacity to be added over the next decade. Rise in coal, crude imports to drive near-term traffic growth: MPSEZ will commission its 50mtpa integrated coal terminal in Q4FY11. This will cater to the coal import requirement of Tata Power (for its 4,000MW Mundra UMPP) and Adani Power (4,620MW Mundra power plant). In addition, MPSEZ will handle crude imports to be used for the 9mtpa Guru Gobind Singh refinery (GGSRL), expected to be commissioned in H2FY12. These imports (coal and crude) will account for a sizable portion (39mtpa) of incremental traffic at the port. SEZ land sale to pick up in H2: MPSEZ has 24,000 acres of land, of which 16,000 acres have been notified as SEZ land. In addition, another 8,000 acres of land are in various stages of transfer. While MPSEZ has not seen any sale of SEZ land in H1FY11, It is understood that it is looking to consummate sales of 240 acres in H2FY11. A key risk on the SEZ business is the potential removal of tax concessions for SEZ developers and units under the proposed Direct Tax Code. It has revenue/earnings CAGR of 35 % & 30 % over FY10-FY13E; the Mar ’12 SOTP-based target price stands at Rs 175/sh.  A key upside risk can come from value creation in new port projects that MPSEZ is exploring in India and overseas. Downside risks can emanate from any changes in the tax rules for SEZ developer and units.
Valuation matrix 
(X) Times FY 10 FY 11 (e)FY 12 (e)FY 13 (e)
P / E @ CMP43.732.423.220.0
P / E @ TARGET52.038.627.723.8
EV / EBITDA @ CMP28.023.516.012.9

5 comments :

  1. Hi Bhavikk,
    Excellent analysis of Mundra's business.
    Hats off to you.
    I came across your blog through Moneycontrol board on Gillette India.
    Will seriously think about investing in Mundra.
    As I have seen such excellent analysis, I get tempted for more.
    I wanted you suggestion on 2 stocks
    - IL & FS Investment Managements
    - Agre Developers ( pick from Ashish Chugh - http://www.moneycontrol.com/video/stocks-views/limited-downsideagre-developers-ashish-chugh_515869.html)

    Thanks once again.
    With Regards,
    Vikas

    ReplyDelete
  2. HI VIKAS
    thanks for visiting my blog and expressing your views on my post....
    I will surely give my views on IL&FS investment Mangement I personally like this stock & off course on Agre developers a company by Pantaloon ....
    Once again thanks, do visit my blog again.Also add your self to follow tab, and suggest my blog to your friends.....I hope they would like it too...Thank you very much to appreciate my efforts for educating investors

    ReplyDelete
  3. Mundra Port And Special Economic Zone Limited has informed the Exchange that the Company has fixed February 15, 2011 as the Record Date for the purpose of payment of Interim Dividend on Equity Shares for the Financial Year 2010-11, if declared by the Board of Directors at their meeting scheduled to be held on February 7, 2011.

    ReplyDelete
  4. Hi Bhavik, it's really nice view of company. I do agree that Mundra will grow very quickly. I bought 600 shares and will add another 1000 shares once it will be on 137 level. once again it was nice snap shot and over view of Mundra port.

    Cheers,

    Bhavin

    ReplyDelete
  5. its a 2011 post... when I wanted it.. sad I had to go through lots of papers and reports to finish my paper..

    How come I did not find it then!! well I recomend your blog to everyone and free of cost ;)

    ReplyDelete

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