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Wednesday, January 23, 2013


Scrip Code: 533271 ASHOKA
CMP:  Rs. 199.00; Buy at Rs. 195 - 200 levels.
Medium to Long term Target: Rs. 215; 
STOP LOSS – Rs. 183.00; Market Cap: Rs. 1,047.75 Cr; 52 Week High/Low: Rs. 283.00 / Rs. 181.08
Total Shares: 5,26,50,860 shares; Promoters : 3,54,81,587 shares –67.39 %; Total Public holding : 1,71,69,273 shares – 32.61 %; Book Value: Rs. 147.97; Face Value: Rs. 10.00; EPS: Rs. 21.49; Div: 00.00 % ; P/E: 9.26 times; Ind. P/E: 21.45; EV/EBITDA: 5.70.
Total Debt: Rs. 282.42 Cr; Enterprise Value: Rs. 1,330.17 Cr.

ASHOKA BUILDCON LTD: The Company was incorporated in 1976 and is based in Nashik, Maharashtra - India. Ashoka Buildcon Limited operates as an infrastructure development company in India. It focuses on developing and building infrastructure facilities on design, build, finance, operate, and transfer (DBFOT) basis in highways; and engineering, procurement, and construction (EPC) basis in highways and the power sector. The company is also involved in the sale and installation of software solutions. The company operates in four divisions: Build, Operate, and Transfer (BOT); EPC; RMC and Bitumen; and Toll Collection Contract. The BOT division builds and operates roads and bridges on Built Operate and Transfer basis. It has interest in 21 BOT road projects including road projects in Maharashtra, Madhya Pradesh, Chhattisgarh, Karnataka, and Orissa. The EPC division is involved in the engineering, design, procurement, and construction of roads, bridges, distribution transformers, electricity substations, commercial buildings, industrial buildings, and institutional buildings for third parties. This division also constructs, maintains, and repairs roads and bridges for BOT division. The RMC and Bitumen division manufactures and sells ready-mix concrete, bitumen, and pre-cast concrete poles. The Toll Collection Contract division collects tolls on roads and bridges owned and constructed by third parties. Ashoka Buildcon ltd is compared with Praj Industries Ltd, Infotech Enterprises Ltd, Marg Ltd.

Investment Rationale:
Ashoka Buildcon ltd came with an IPO on September 2010 with an issue price of Rs. 324/share and rise about Rs. 225 Cr with an objective to meet working capital requirements, investment in capital equipment, prepayment & repayment of project loans of the company, to fund certain subsidiaries for prepayment and repayment of their loans. Ashoka Buildcon and GVR Infra Projects, a consortium (50:50) emerged as the lowest bidder for the road project in Chennai. The project was by Tamil Nadu Road Development Company Ltd (TNRDC) for their project namely Development of Chennai Outer ring Road Phase II from Nemilicheri in NH 205 to Minjur in Thiruvottiyur – Ponneri – Panchetti (TPP) Road for Design, Build, Finance, Operate & Transfer (DBFOT) basis at Chennai, in the state of Tamil Nadu. The project is on annuity basis with a Concession period of 20 years & TNRDC’s cost of the project is around Rs. 985.44 Cr. The Public works department, PWD (Maharashtra) has withdrawn the toll collection rights from Ashoka Buildcon Ltd for Ahmednagar Karmala road project which was under BOT Scheme (with toll rights) prematurely, which were to expire on November 04, 2015. Ahmednagar Karmala project was envisaged in 1991 with reference interest rate linked to RBI published rate. Based on an index of lending rates (published by leading banks) which have been in downward trend, PWD has recalculated the concession termination date as Nov 4, 2012. Toll collection which was in effect on 17th November 2012 has already been discontinued. The notification states that the lending interest rates have been changed by the RBI and consequently as per contract provisions, the concession period in view of new lending rates reworked, has ended before Nov 14, 2012. This termination will negatively impacted on near term profitability of the Project which contributes around 4.5 % or Rs.16/share in the overall fair value of Rs 350/share. The project has an expected toll collection of Rs. 2.75 Cr in FY13E which is 8.6 % of the overall toll collection for Ashoka Buildcon & Adjusted PAT from this project for FY14E stood at Rs 2.00 Cr which is 13 % of FY14E consolidated APAT. Considering it was a debt free mature project in its portfolio the profit contribution to the overall consolidated PAT is much higher. Ashoka Buildcon ltd’s 2 other projects also faces the risk of early termination. The PWD (Maharashtra) is in the process of expanding the existing 2 lane state highways network at 10 or 11 stretches to 4 lanes. PWD (Mah) has already awarded a part of Ahmednagar Karmala Tembhurni stretch to Supreme infrastructure in Dec-10 for expanding the stretch to 4 lanes. Management indicated that there are two more projects in its portfolio which are based on similar concession agreement i.e. Pune Shirur and Sherinallah put together commands another Rs 10/share or 3 % of value in Some Of The Part valuation. Total Value at risk owing to such a decision is 7.5 % of overall SoTP owing to such a move. One can buy based on cheap valuation with a target price of Rs 215.

Outlook and Valuation:
Ashoka Buildcon’s subsidiary Ashoka Concessions Ltd received the first tranche of the $150 million investment being made by two private equity funds – Macquarie SBI infrastructure Fund and SBI Macquarie Infrastructure Trust. The company will use these funds as equity in various projects under construction. The PWD (Mah) has awarded 6 projects so far to ABL from these 2 projects have already achieved termination i.e. Dhule bypass & Anwali Kasegaon on a natural course. Company’s management highlights that 2 projects out of the remaining 3 i.e. Pune Shirur and Sherinallah are based on similar concession agreement & both of these projects might face early termination risk after the termination of Nagar Karmala project. Both put together commands 3 % of SoTP or Rs 10/share. In terms of overall revenue contribution to the toll collection Sherinallah and Pune shirur commands 10 % and 6 % in terms of profitability based on FY14E. Sudden removal of tolling rights for Ahmednagar Karmala came in as a surprise. The project comprises 5 % of the company’s fair value based on FY14E target price. Such an event can at max be replicated on two other projects as guided by the management. Overall Ashoka Buildcon Ltd even after the termination of Nagar Karmala is still collecting toll at 3 other projects from PWD (Mah). At the current market price of Rs. 199.00, the stock is trading at a PE of 8.96 x FY13E and 7.96 x FY14E respectively. The company can post Earnings per share (EPS) of Rs. 22.20 in FY13E and Rs. 25.00 in FY14E. One can buy Ashoka Buildcon with a target price of Rs. 215.00 for Medium to Long term investment.

SALES (Rs. Crs)1,302.001,500.001,903.302,307.60
NET PROFIT (Rs. Crs) 100.80124.80116.80131.60
EPS (Rs.)19.1023.7022.2025.00
PE (x)10.708.609.208.20
P/BV (x)
ROE (%)14.9013.0010.7010.80
ROCE (%)11.007.803.703.00

I would buy ASHOKA BUILDCON with a price target of Rs. 215.00 for the medium to long term target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 183.00 on your every purchase.



Sunday, January 13, 2013


Scrip Code: 532921 ADANIPORTS

CMP:  Rs. 131.70; Buy at current levels.

Medium term Target: Rs.145 ; Long term Target: Rs. 165; STOP LOSS – Rs. 121.16; Market Cap: Rs. 26,384.70 Cr; 52 Week High/Low: Rs. 157.75 / Rs. 105.65
Total Shares: 200,33,94,100 shares; Promoters : 155,25,38,715 shares –77.50 %; Total Public holding : 45,08,55,385 shares – 22.50 %; Book Value: Rs. 26.05; Face Value: Rs. 2.00; EPS: Rs. 7.47; Div: 50.00 % ; P/E: 17.63 times; Ind. P/E: 20.97; EV/EBITDA: 16.93.
Total Debt: Rs. 5,137.69 Cr; Enterprise Value: Rs. 31,522.39 Cr.

Adani Port and Special Economic Zone LTD: The Company was incorporated in 1998 and is based in Ahmedabad, Gujarat- India. It was earlier known as Gujarat Adani Port Limited and later named as Mundra Port and Special Economic Zone Ltd. In January 2012 the company was renamed as Adani Port and Special Economic Zone Ltd. Adani Port and Special Economic Zone Ltd is a subsidiary of Adani Enterprises Limited from September 2010. The company engages in the development, operations and maintenance of multi product special economic zone and related infrastructure in India. The company through its Mundra port located in Gulf of Kutch, India provides cargo handling & other value-added port related services. It operates port infrastructure facilities of bulk cargo at Dahej, Gujarat, handles bulk, liquid and containerized cargo, single point mooring, storage, and transportation of cargo by road, rail and pipeline. APSEZL is near completion of setting up coal cargo terminals at Murmugao Port, Goa. The company is also developing a non- LNG multi-user, multi-cargo port facilities at Hazira under the sub-concession route The company also operates container trains on specific railways routes; and provides multi-model cargo storage and logistics services through the development of inland container depots at various locations. It operates a fleet of approximately 2517 vessels. In addition, APSEZL provides non scheduled (passenger) services through its aircrafts. Adani Port and SEZ ltd is compared with Essar Port & Gujarat Pipavav Port locally & Globally with Meiko Trans Co. Ltd  & Azuma Shipping co. ltd of Japan; Rizhao Port Co. ltd; Shenzhen Chiwan Wharf Holdings Ltd.

Investment Rationale:
Adani Port is the largest private Port in Indian with No.2 position in container cargo. Adani Port’s market share in all India cargo i.e. Mundra + Pipavav + Major Ports has moved up from 14.4 % in H1FY12 to 17 % in H1FY13. Due to weak macro’s it faced a slowdown in container cargo growth to 16 % YoY v/s 25 % in the last quarter. Adani ports during the quarter commenced the trial runs at Hazira Port & CT-III (ahead of its schedule in Q2FY13) taking the overall operational portfolio across 4 ports. Abbot point recorded cargo volumes of 3.67MT, Dahej recorded cargo volumes of 1.2 mn tons & Hazira (trial runs) recorded cargo volumes at 0.11 MT in Q2FY13. Adani Ports has handled 47.88 MT at all the ports under their management during H1FY13 recording a growth of 24 % year on year. Dahej port has handled 3MT in H1FY13 with a positive APAT generation in H1FY13. CT-3 has also commenced operations in Aug-12 which has raised the container handling capacity of CT-3 from 2.5mteu to 4.3mteu. Hazira port has also commenced trial runs during the quarter, commercialization is expected from FY14E. APSEZ delivered solid Q2 performance by reporting standalone EBITDA at Rs. 485 Cr up at robust 28% year on year, led by high volumes in cargos. It’s EBIDTA margins stood at 69.5 % marginally up by 5.10 % year on year. The company posted revenues at Rs. 698 Cr up by 18.7 % year on year led by volume beat, as cargo volumes at 20.4MMT grew at a healthy rate of 15 % year on year. The Dry bulk segment (9.9 mt) grew at robust 41 % year on year, while the container cargo (6.2 mt) grew by 16 % year on year. APSEZ posted blended realization of Rs. 342/tone. Its’ APAT came at Rs 370 Cr up by 35.9 % year on year with significantly higher other income at Rs. 97.3 Cr which includes Rs 50 Cr of SEZ income. On Consolidate basis - Its revenue came at Rs. 1020 Cr up by 19 % year on year led by outperformance by Mundra port. Adani ports in Q2FY13 handled overall cargo of 25.7mn which included 3.67mt at Abbot Point and 1.5mt at Dahej port. EBITDA came in at Rs. 64o Cr up by 24.5 % year on year with a sharp decline in EBITDA margins at 62.6 %. APAT came in at Rs. 275 Cr down by 4 % year on year led by higher other income of Rs. 75.1 Cr. Overall implied EBITDA of other subsidiaries stood at Rs. 120 Cr down by 27 % quarter on quarter. ADSEZ reported a strong increase in standalone net debt by Rs. 1850 Cr from Mar 31, 2012 levels to Rs. 6450 Cr at H1FY13, Simultaneously the money deployed in short-term Loans & Advances has raised sharply by Rs. 1050 Cr to Rs. 1220 Cr raising questions on wasteful deployment of resources. We await clarifications on the nature of advances.

Outlook and Valuation:
ADANI PORT is among the largest beneficiaries of an increasing demand-supply mismatch in India’s port capacity. APSEZ’s competitive advantages and attractive location plus connectivity provides a strong visibility of traffic for APSEZ. It should be noted that 90 % of APSEZ’s estimated traffic comprises of coal, crude oil, and container. Of this, coal and crude oil are not likely to see any impact from global macro concerns, while container traffic should continue to benefit from the shortage of capacity on India’s west coast. Based on the SOTP valuation method the value APSEZ comes at Rs. 165 per share, implying an upside of 25.28 % from current levels. The value of Mundra Port (core operating asset of APSEZ) comes at Rs. 119 per share, constituting 72 % of total value of APSEZ. Mundra Port, given its strategic positioning & diversified mix of cargo & is expected to deliver strong volume growth. The company having delivered a strong track record of maintaining superior realization & margin has emerged as the preferred port due to superior infrastructure which facilitates faster transit of cargo, thereby reducing the overall cost of handling for logistic companies and end users. Amongst other projects, Dahej and Abbot Point (Australia) are already operational and gaining further traction. Despite been in a capital intensive business, the debt situation for ADSEZ is at very comfortable level. The stable cash flows from assured cargo and minimum working capital investment would be very important for the company to make more capex in the future for growth. At the current market price of Rs. 131.70, the stock is trading at a PE of 29.26 x FY13E and 18.41 x FY14E respectively. The company can post Earnings per share (EPS) of Rs. 4.50 in FY13E and Rs. 7.30 in FY14E. The SOTP (sum‐of‐the‐parts) valuation of Adani Port & Sez comes at Rs. 165. One can buy APSEZ with medium term target of Rs.145 & a Long term target price of Rs. 165.00.

SOTP Valuation :-

Business SubsidiaryValue Per Share (in Rs.) 
Mundra Port119.00
Value of SEZ16.00
Adani Petronet Dahej Pvt Ltd 5.80
Mormugao Port2.00 
Abbot Point Coal Terminal12.00
Hazira Port4.00
Vizag Port2.00
Adani Logistics Ltd5.00

SALES (Rs. Crs)2,000.013,270.804,026.805,231.30
NET PROFIT (Rs. Crs) 943.501,094.80913.201,464.50
EPS (Rs.)4.705.404.507.30
PE (x)26.1022.5027.0016.80
P/BV (x)5.905.104.503.70
EV/EBITDA (x)21.1020.0016.6012.90
ROE (%)24.7024.3017.6024.10
ROCE (%)14.7010.607.909.20

I would buy ADANI PORTS & SEZ with a price target of Rs. 145 for medium term & Rs. 165 for long term. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 121.16 on your every purchase. 

*As the author of this blog I disclose that I do hold ADANI PORT AND SEZ LTD in my investment portfolio.



Thursday, January 3, 2013


Scrip Code: 533177 IL&FSTRANS
CMP:  Rs. 205.40; Accumulate at every Dips.
Short term Target: Rs. 215, 6 month Target – Rs. 250; 
STOP LOSS – Rs. 189.00; Market Cap: Rs. 3,990.25 Cr; 52 Week High/Low: Rs. 223.90 / Rs. 142.55
Total Shares: 19,42,67,732 shares; Promoters : 14,07,63,003 shares –72.46 %; Total Public holding : 5,35,04,729 shares – 27.54 %; Book Value: Rs. 100.06; Face Value: Rs. 10.00; EPS: Rs. 16.45; Div: 40.00 % ; P/E: 12.48 times; Ind. P/E: 20.67; EV/EBITDA: 9.28.
Total Debt: 2,726.06 Cr; Enterprise Value: Rs. 6,716.32 Cr.

IL&FS TRANSPORTATION NETWORKS LIMITED: ITNL was incorporated in 2000 and is based in Mumbai, India. It was formerly known as Consolidated Transportation Networks Limited and changed its name to IL&FS Transportation Networks Limited in September 2005. IL&FS Transportation Networks Limited operates in the Highway and street construction sector. IL&FS Transportation Networks (ITNL) is a surface transportation infrastructure company. ITNL is the builder, operator and transfer (BOT) road operators engaged in developing, designing, operating, maintaining and facilitating surface transportation infrastructure projects. ITNL’s services include advisory and management services, supervisory services, operation and maintenance services, toll collection services for toll road projects. ITNL provides maintenance services primarily for highways and roads in Spain, Portugal and Latin America, and advisory and project management for BOT road projects, trades in materials used in the maintenance of roads & undertakes construction contracts. On May 31,2010, it acquired Area De Servicio Coiros S.L.U. On September 1, 2010, it acquired Conservacion De Infraestructuras De Mexico S.A. De C.V. On December 17, 2010, it acquired Alcantarilla Fotovoltaica, S.L.U. and Area De Servicio Punta Umbria, S.L.U. IL&FS Transportation Networks Limited is a subsidiary of Infrastructure Leasing & Financial Services Limited. The company is compared to NRW Holdings Limited globally & locally with Cummins India Limited and Walchandnagar Industries Limited.

Investment Rationale:
IL&FS Transportation Network limited is India’s largest road developer (7,621 lane kms). ITNL is the largest private sector Built Operate Transfer road operator from IL&FS Group , with a portfolio of 22 domestic road projects and 1 international projects aggregating to  7,621 stake adjusted lane in km (SALK) in its portfolio. ITNL has 11 operational projects with 3,281 SALK and remaining 12 projects or 4341 SALK under development.  After a long dry patch ITNL has won couple of projects over the last couple of quarters. Company's order book stands at Rs. 10,900 Cr and it has also received LOA for Kharagpur-Baleshwar project during Oct, 2012 and has also achieved financial closure for the same. ITNL was also awarded a project worth Rs. 2,143 Cr from HUDA for developing the 6.5 km rail Metro Link Extension from Sikanderpur Station to Sector 56, Gurgaon on a DBFOT basis. ITNL has a stake of 65 % in this project and is expected to commission by 2015-16. With an order book of Rs.10,9oo Cr, it is expected that the construction division revenues can grow at a CAGR of 11 % between FY12-FY14. This is likely to be led by construction of Jharkhand roads, Hazaribagh Ranchi project, Chenani-Nashri project and Shillong Jorbat project on the annuity side and Chandrapur-Warora project, Moradabad Bareilly project, Narkatpally Addanki project and Pune Sholapur project coupled with recently awarded Kiratput NerChowk, Kharagpur Baleshwar project and Sikar Bikaner project on the toll side. Built Operate and Transfer revenues are expected to grow at a CAGR of 37 % between the FY12 FY14 led by improvement in toll collection on operational projects. Overall consolidated revenues are expected to grow at a CAGR of 13.5 % between FY12-FY14. Margins of ITNL stood strong at 33 % led by higher proportion of toll - annuity revenues as well as strong fee income seen during the quarter. Toll/Annuity revenues as proportion of total revenues moved up to 15.4 % in Q2FY13 as against 10.7% in Q2FY12 further the margins are expected to be in range of 28 % and 29.6 % for FY13 and FY14 respectively. ITNL’s Consolidated EBITDA stood at Rs. 450 Cr a raise of 27 %. Revenue stood at Rs. 1370 Cr a raise of 9.2 % yoy. ITNL’s Net profit was flat YoY for Q2FY13 and was impacted by increase in overall interest outgo. Standalone PAT stood at Rs. 94.1 Cr a raise of 54.6 % yoy, EBITDA stood at Rs. 193 Cr a rasie of 45 % yoy & E&C revenues declined by 24 % yoy to Rs. 390 Cr. Consolidated APAT Stood at Rs 116 Cr flat yoy led by higher than expected fee income at Rs. 210 Cr. Interest cost moved up to Rs. 280 Cr from Rs. 169 Cr in Q2FY12 due to higher debt availed for the under construction projects. Company's current consolidated debt stands at Rs. 12,070 Cr with a consolidated Debt Equity of 3.8x v/s 3.7 x in FY12. Overall standalone debt is at Rs. 3140 Cr. Standalone Debt to Equity is pegged at 1.5x, although ILFT has the already sought the borrowing limit till Rs. 5000 Cr at the Parent level, it is believed that the standalone balance appears too levered vis a vis other peers in the industry. Along with this, with increase in execution of annuity projects, interest cost also jumps significantly since these are expensed for under construction annuity projects as against being capitalized for toll projects. Further the consolidated E&C margin also came in ahead of exp. at 33 %, however execution came in lower than expected. ILFT won the metro extension project during the quarter from Haryana Urban Development Authority (HUDA) for developing 6.5km rail metro link stretching from Sikandarpur station to Sector 56 (Gurgaon) worth Rs 21bn under DBFOT for 98 year concession period. The project is an extension to the existing metro rail under development by IL&FS transportation led consortium. IL&FS has also received the LOA for Kharagpur Baleshwar project in the state of Orissa and has tied up 60% of the project cost under the financial tie up from State Bank of Patiala. Since the competition is significantly down, ILFS transportation will be a key beneficiary in the next round of bidding. Higher margins were owing to higher fee income during the quarter. ILFT is executing projects at a rampant pace resulting in growing leverage at both the consolidated and parent level.

Outlook and Valuation:
The construction backlog of ITNL is at Rs.10,900 Cr or 2.7x FY12 construction revenues, which provides significant visibility to the growth prospects for the construction vertical, however the overall profitability is also driven by fee income which is majorly recognized on new project wins. With the lack of new wins at a time when the competitive intensity was seemingly high at NHAI & this will be beneficial for the company. And the pipeline now indicates that the couple of projects which are lined up in the next round of bidding will provide IL&FS transportation an edge over the other bidders as the projects are in nearby territory to the projects which are already operated by IL&FS transportation. ITNL’s Average daily toll & annuity collection witnessed marginal increase of 2.6% qoq led by 6.9% qoq growth in RIDCOR project & 17.9% qoq increase in Rajkot – Jetpur stretch. Two mature operational assets i.e Ahmedabad Mehsana & Vadodara Halol were flat sequentially owing to toll collection getting outsourced to third party, however they continue to witness 5.6%yoy growth. The annuity projects continue to witness Rs. 81 lakhs/day collection in line with expectation. The overall growth in average daily collection stood at 1.7% qoq to 2.45 Cr/day. The Construction business of the company is valued at 5x earnings, lower than other construction peers since the construction work is outsourced and higher margins are also contributed by advisory fee. This translates into value of Rs. 128 per share. The value of BOT projects comes at Rs. 173 per share arrived by using FCFE approach using cost of equity of 13.4 %. E&C business valuation comes at Rs177 per share (4.5X FY14E EBITDA) and value of other subsidiaries comes at Rs 37 per share. Net debt works out to Rs.167 per share at parent level. ITNL is highly sensitive to interest rate, 100 basis points correction in the risk free interest rate leads to 26 % increase in fair value of ITNL, & this remains a key beneficiary of reduction in risk free rate of project financing. ITNL has the highest leverage in the road sectors making it highly interest rate sensitive. At the current market price of Rs. 205.40, the stock is trading at a PE of 8.15 x FY13E and 8.93 x FY14E respectively. The company can post Earnings per share (EPS) of Rs. 25.20 in FY13E and Rs. 23.00 in FY14E. One can buy ITNL with a target price of Rs. 220.00 for Medium to Long term investment.

SALES (Rs. Crs)4,048.205,605.607,009.306,932.40
NET PROFIT (Rs. Crs) 432.90497.00490.30447.10
EPS (Rs.)22.3025.6025.2023.00
PE (x)8.507.407.508.20
P/BV (x)1.601.401.201.10
EV/EBITDA (x)7.509.308.708.10
ROE (%)22.2020.2017.0013.70
ROCE (%)17.6014.0012.4011.90

I would buy IL&FS TRANSPORT with a price target of Rs. 250.00 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 189.00 on your every purchase.


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