BackAPSEZ’s bright view is under question
Around 41% of APSEZ’s cargo volumes are generated by containersGiven APSEZ’s tactical investments and capacity additions, the company is seen to be better placed
PremiumAdani Ports and Special Economic Zone Ltd (APSEZ) made modest cuts to its annual forecast last month despite a notable slowdown in the September quarter. Volume growth slowed from 18% in the June quarter to a mere 1% last quarter.
But the company projected revenue growth of 11-13% for FY20 compared with its earlier guidance of 12-14% growth.
Evidently, the management hopes that volumes will improve in the second half of the fiscal year. However, traffic trends at major ports do not indicate any major recovery.
Total cargo at major ports across the country declined 0.3% in November, shows data compiled by Antique Stock Broking Ltd. Worryingly, the fall in container traffic worsened. Container traffic, measured in twenty-foot equivalent unit, dropped 5% last month, a steeper fall compared with the 1.7% drop in October.
Around 41% of APSEZ’s cargo volumes are generated by containers. Also, more than one-third (35%) of India’s container traffic is handled by the company.
As power plants come out of their maintenance shutdowns during the monsoon, the sector is expected to step up coal imports, which is another large business segment for APSEZ. But coal volumes have not seen any noticeable recovery yet. Total coal volumes at major ports were down 22% in November.
Given APSEZ’s tactical investments and capacity additions, the company is seen to be better placed. Volume growth in first half of FY20 stood at 9% vis-à-vis 5% expansion at the industry level (Indian ports’ total cargo).
Still, APSEZ’s pan-India presence is increasingly making it difficult for the company to escape the slowdown in cargo traffic. The deceleration in volume growth in the September quarter is a case in point.
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