The Adani Ports and Special Economic Zone Ltd (APSEZ) stock has declined by 5% to Rs 115 since it announced its financial results for the March quarter on Monday. During the same period, the benchmark Sensex index has improved marginally.
A concern for the firm’s investors is that cargo growth has been relatively poor for the March quarter compared with the nine months ended December. For the March quarter, cargo volume handled increased by 10% year-on-year (y-o-y) to 15.53 million tonnes. On the other hand, cargo volume in the nine months ended December increased by about 30%.
Gautam Adani, chairman, Adani Group.
The main reason for the relatively slower volume growth in the quarter is lower dry bulk cargo volume, which was affected due to lower coal cargo. Although, container volumes performed well and compensated for the poor dry bulk show to some extent.
Accordingly, APSEZ’s total revenue growth for the quarter was just 6% y-o-y to Rs 642 crore. While the firm’s operating profit margin has declined by 172 basis points to 71.3% compared with the same period last year, the metric has improved against the nine-month period to December. A basis point is one-hundredth of a percentage point.
APSEZ’s March quarter operating performance was better compared with the preceding nine months as growth in operating expenses and employee costs was relatively slower. But decline in other income and weaker operating performance on a y-o-y basis meant reported net profit rose by just 1% to Rs 339 crore.
While the last quarter volume growth was lower, for the fiscal 2012 as a whole, APSEZ has performed much better than the major ports. For instance, its total cargo-handled volume growth was 24% in comparison with the 2% decline in the major ports. But then, that was already known to investors and seems to be built into the stock price.
At the current price, the APSEZ stock trades at 15.6 times its estimated earnings for this fiscal. True, the recent fall in the share price makes valuations look attractive, but concerns of volume slowdown remain, which could limit near-term rise in the stock.
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