Mundra Port SEZ’s June quarter results offer no surprises

Mundra Port SEZ’s June quarter results offer no surprises

Shares of Mundra Port and Special Economic Zone Ltd (MPSEZ) have lost 12.5% since the release of the Karnataka Lokayukta report on illegal mining last week. Adani Enterprises Ltd (AEL) was one of the companies accused in the state’s mining scandal. MPSEZ is a subsidiary of AEL.

AEL released a statement on BSE on 30 July, saying that “it has never had any mining interest in iron ore directly or indirectly anywhere in India, let alone Karnataka". The AEL stock recovered a bit after that, but there’s been no respite for investors in MPSEZ.

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An analyst who did not want to be named says, “A recent news report mentioned that the refinancing of the bridge loan taken to finance the Abbot Point Coal Terminal acquisition is not finalized yet and that probably could be one of the reasons weighing on the stock."

Meanwhile, MPSEZ announced its June quarter results, which were a tad below some analysts’ expectations. Total operating revenue increased 27% over the same period last year to 530 crore. The company handled 15 million tonnes (mt) of cargo during the quarter, which was 20% higher than last year’s June quarter. Growth at major ports has been far slower at 5% during the same period and MPSEZ’s share of cargo increased by one percentage point to 9.3%. The container business also performed well and cargo increased by 23% from the year ago. The company maintains that major growth drivers have been containers and bulk cargo (coal, fertilizer, etc).

Operating performance though was a bit weak, with operating profit margins declining by 114 basis points to 68.5%, as operating expenses and employee costs increased at a faster pace. One basis point is one-hundredth of a percentage point. Slightly weaker operating performance, higher finance costs and tax outgo meant that net profit grew at a relatively slower pace of 20% to 254 crore.

The MPSEZ stock fell 2.6% to 139 on Thursday when numbers were announced compared with the 1.4% decline in the Sensex. The company is looking to handle 72-75 mt cargo in the current fiscal year, which analysts say is manageable. While the recent correction does make valuations look attractive, investors should keep a tab on one key metric—traffic volatility.

Graphic by Sandeep Bhatnagar/Mint

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