The Mundra Port and Special Economic Zone Ltd (MPSEZ) stock shot up by 5% on Monday to Rs148 against a 1.45% increase in the Bombay Stock Exchange’s benchmark Sensex, after the company announced that it handled more than 50 million tonnes (mt) of cargo in fiscal 2011. Additionally, MPSEZ expects to handle 80 mt of cargo in the current fiscal and cross 100 mt in the next. Analysts maintain that this is in keeping with the company’s guidance and the re-confirmation appears to have boosted sentiment.

With this, the stock has settled at the same level that was seen before finance minister Pranab Mukherjee proposed to levy the minimum alternate tax (MAT) on developers of special economic zones (SEZs) and units operating in SEZs in his February budget speech. In contrast, the Sensex has risen by 11% since the budget.

The company maintains that the imposition of MAT at the rate of about 20% won’t reflect in earnings per share; but it would lead to a cash outflow. MPSEZ intends to avail MAT credit entitlement and the SEZ does become less attractive in the absence of the tax exemption.

Meanwhile, MPSEZ has won a bid to develop a coal terminal at Visakhapatnam port at a cost of over Rs300 crore. The terminal will be able to handle imported coal volumes to the tune of 6.5 mt per annum and is expected to be commissioned within the next two years.

While the size of the investment is small, it will allow the company to enter the east coast and help it understand its potential. Further, it is in keeping with MPSEZ’s objective of establishing a pan-India presence eventually.

“This development alone has marginal upside. Assuming 70:30 debt-equity ratio and two times book value, the upside is under Rs1 per share. However, if this is a precursor to larger greenfield opportunity on the east coast, then it is sentiment-positive," wrote JPMorgan analysts in a note after the announcement of the contract.

Even as sentiment seems to be improving, triggers in the near future appear limited. Having said that, MPSEZ’s strong execution abilities in the port development space and growth outlook are positives for the stock.

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