Kotak Securities puts ACCUMULATE on Mundra Port

Kotak Securities puts ACCUMULATE on Mundra Port

We recently met the management of Mundra Port and SEZ (MPSEZ).

Mundra Port handled 3.3 MMT of cargo in the month of November 2008 as against 2.8 MMT handled in November 2007 thereby registering growth of 15.4% on y-o-y basis.

We are fairly confident that the port would handle ~ 40 MMT of cargo in FY09E and 50 MMT in FY10E which is inline with our earning estimates.

We maintain our earning estimates and expect MPSEZ to report consolidated EPS of Rs.9.9 for FY09E moving up to Rs14.9 in FY10E.

At Rs308, the stock trades at 3.6x book value, 20.8x earnings and 15.0x cash earnings based on FY10E.

In view of the slowdown in economy and manufacturing growth we had downgraded the stock to ACCUMULATE at Rs.375 on 27 October 2008. Since then the stock has corrected by ~ 18% in one and half months.

We continue to remain positive on the long term growth prospects of MPSEZ. This is due to its integrated business model coupled with superior infrastructure consisting of multi cargo port, SEZ, airport, rail and road connectivity.

Also the industries in the surrounding SEZ would provide steady flow of cargo to the port. This would ensure steady growth in volume of cargo handled at the port.

However due to near term concerns of slowdown in economy, slowing manufacturing and exports growth we maintain ACCUMULATE rating on MPSEZ with revised price target of Rs426 (Rs525 earlier).