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Good cargo volumes boost Mundra Port’s performance

Good cargo volumes boost Mundra Port’s performance
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First Published: Mon, Nov 21 2011. 10 39 PM IST

Updated: Mon, Nov 21 2011. 10 39 PM IST
Mundra Port and Special Economic Zone Ltd (MPSEZ) announced on Monday that its board of directors approved the change of the firm’s name to Adani Port and Special Economic Zone.
Earlier this month, the company announced its September quarter financials, wherein it posted 29% year-on-year (y-o-y) growth in its net profit to Rs 273 crore.
That growth is higher than the 20% net profit growth the company reported in the June quarter. However, revenue growth in the September quarter at 44% to Rs 588 crore has been better than the 27% revenue growth reported in the June quarter.
Revenue growth in the September quarter was mainly helped by good cargo volume growth. MPSEZ handled 16.8 million tonnes of cargo, which represents a 33.5% increase on a y-o-y basis.
Cargo handled is higher on a sequential basis as well. For the September quarter, cargo volume growth was driven primarily by coal volumes. Container volumes, too, registered decent growth of 16%, which according to analysts indicates strong exports and imports. However, slowing exports means that container traffic growth is at risk in the days to come.
On the operating front, MPSEZ’s operating profit rose by a commendable 51% to Rs 410 crore and the margin, too, improved on a y-o-y basis to 66.2%.
However, operating profit margin was higher in the June quarter at 68.5%.
But the strong operating profit growth could not translate into a similar kind of growth at the net level. One reason is that depreciation costs were higher.
Secondly, the company’s interest expenses have increased substantially.
MPSEZ’s loan funds have increased sharply by around 61% to Rs 4,355 crore as on 30 September from March.
Free cash flow (FCF) is likely to be affected. Higher-than-expected growth in capital expenditure in the first half of fiscal 2012 (FY12) and loans to subsidiaries are likely to lead to another year of negative FCF at the stand-alone level, according to analysts from JPMorgan. They estimate Rs 400 crore negative FCF at stand-alone level in FY12 against an earlier estimate of a positive Rs 910 crore.
Since MPSEZ announced its September quarter financials, the stock is down by 14% to Rs 135.90 compared with an 8% decline in the benchmark Sensex. While valuations may appear attractive after the recent decline, investors should keep a tab on traffic growth—a key metric for this stock.
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First Published: Mon, Nov 21 2011. 10 39 PM IST