We retain our ‘overweight’ rating on Adani Ports and SEZ with an increased price target of Rs 305 (earlier R275). We adjust our model for FY2014 annual report and strong cargo/margin trends in the first quarter results of this fiscal.
Our FY15/16E EPS increase by 0.5%/3.5%. With most of the issues now resolved (environment approval for Mundra SEZ, Dhamra acquisition), we believe that performance of the stock will now depend on traffic and margin trends, which was reinforced in the first quarter results of FY15.
We discount domestic assets at an 11.1% WACC. We value Mundra port at R167 per share, which includes the 50% option value for the possible extension of the concession period. We value SEZ at R31, and Hazira too at R31, assuming peak traffic of 36 MTPA. Our R13 valuation for Dahej assumes peak traffic of 20 MTPA. We value Murmugao, assuming peak coal traffic of 6 MTPA, at R3. We value Adani Logistics at 2x FY15E invested book value. We value Vizag terminal at R1, assuming peak traffic of 5 MTPA (by FY16E). We value the Kandla bulk berth at R6 at 16 MTPA of peak traffic (by FY18E).
We value the Ennore container terminal at R7, assuming peak traffic of 1,125k TEUs by FY24E. We value the recently acquired Dhamra port at R32, which is at 18x/14x FY15E/16E EV/ebitda. We adjust our valuations for the net debt-to-cash that is not accounted in any of the project valuations. This net debt-to-cash increases the overall valuation by R4.