BackAbsence of SEZ revenue hurts Mundra Port’s margins
Absence of SEZ revenue hurts Mundra Port’s margins
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Mundra Port and Special Economic Zone Ltd (MPSEZ) has seen a 26% increase in total cargo during the first six months of the fiscal, helped by a higher share of coal and containers. This accounted for 54% of the total cargo handled by MPSEZ. For the major ports, coal has remained flat (up 1.5%) and containers have grown 11%. Over the same period, coke/coal traffic has grown 52% and container traffic 33% at Mundra.
Further, MPSEZ benefited from the shutdown of Mumbai Port Trust and Jawaharlal Nehru Port Trust for at least a week due to a collision of ships. The data shows the increasingly important role private ports are playing in the economy.
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Meanwhile, for the quarter ended September, the company’s volumes have increased 24%. Volume growth in dry bulk cargo and container/cars cargo was strong. Dry cargo benefited from coal volumes, which accounted for about one-fourth of the total volume of the company in September while containers accounted for 30% of the total volume.
However, liquid cargo volume fell 17% in the September quarter due to a shutdown of the plant refinery. The company maintains that price realization stood at $325-350 ( ₹ 14,430-15,540 today) per tonne on different products and that they were in the same range last year. This has led to a 26% increase in total operating income to ₹ 413.5 crore.
Operating profit margins show a decline of 546 basis points to 66.2% from 71.6% last year. One basis point is one-hundredth of a percentage point.
This was mainly due to the absence of SEZ income this time in total revenue. The company maintains that SEZ income of ₹ 18 crore (about ₹ 35 crore last year) was not accounted for this time and will reflect in the December quarter financials. Operating profit thus grew at a slower pace of 17% to ₹ 274 crore. Net profit though increased 21% to ₹ 212 crore, as finance costs declined sharply. This was because the company’s cost of borrowing has declined.
On a sequential basis, numbers were disappointing with flat revenue and net profit, and the Street wasn’t pleased. The MPSEZ stock fell 3.7% on Monday to ₹ 164.50 while the BSE-100 was up 0.5%.
In the last one year, the stock has outperformed the BSE-100, but has underperformed since the beginning of this fiscal. “We have reduced our FY11-12 estimates by 2.6-5%, as we believe management is consciously moving slow on SEZ development, evaluating synergy with Mundra Port. After a recent site visit to Mundra Port and the SEZ, we emerge more positive on execution capabilities and lower discounting rate for SEZ cash flows by 200 basis points to 12% (in line with other MPSEZ projects valued)," wrote analysts from JPMorgan in a note to clients on 15 October. Most of the positives seem to be factored in the stock price at the current levels.
Graphic by Yogesh Kumar/Mint
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