Adani Ports & SEZ CMP Target Rating - Spark Capitalmailers.sparkcapital.in/uploads/bharani/Adani Ports & SEZ...Adani Ports & SEZ CMP Rs. 318 Target Rs. 364 Rating BUY Balance Sheet,

Adani Ports & SEZ CMP

Rs. 318

Target

Rs. 364

Rating

BUY

Stock performance (%)

1m 3m 12m

ADSEZ 3.4% 0.3% 20.7%

Sensex -0.3% 2.6% 6.2%

Date July 30, 2015

Market Data

SENSEX 27705

Nifty 8422

Bloomberg ADSEZ IN

Shares o/s 2,071mn

Market Cap Rs. 659bn

52-wk High-Low Rs. 358-244

3m Avg. Daily Vol Rs. 1,161mn

Index member BSE100

Promoters 56.3

Institutions 37.2

Public 6.6

Annual Report Analysis We analyzed the FY15 annual report of Adani Ports & SEZ (ADSEZ) and the following are the key takeaways

FY15 Annual Report Analysis

Cargo Volumes: Standalone volume grew 10% yoy, aided by 13% in Coal, 14% in Containers and 38% in Minerals & Fertilisers; we

expect a 11% CAGR for volumes for FY15-18E led primarily by Containers and Crude. Consolidated volumes grew by 28% led by

57% at Dahej, 93% at Hazira and inclusion of Dhamra’s numbers; commencement of operations at Kandla, Vizag and Goa augurs

well for future growth (expect 16% CAGR for FY15-18E consolidated volume growth)

Margins: Standalone EBITDA margin remains robust at to 67% (adjusted EBITDA margins of 67% in FY14 as well). Key subsidiaries

like Dhamra Dahej, Hazira and Adani Logistics witnessed robust margin improvement in FY15 (53% to 64% for Dhamra, 58% to 62%

for Dahej and 60% to70% for Hazira); as a result Consolidated EBITDA improved to 63% (from 61% in FY14)

Loans and Advances: Standalone loans and advances to related parties and 3rd parties increased from Rs. 50.3bn to Rs. 65.44bn.

Inter Corporate Deposits (ICDs) to related parties increased from Rs. 33.6bn to Rs. 52.71bn; primary beneficiaries have been Adani

Agri fresh (incremental Rs. 1.6bn in FY15), Dhamra Port (Rs. 10bn) and Adani Logistics (incremental Rs. 1.9bn in FY15)

Working Capital & Receivables: Standalone working capital days have increased to 386days (primarily due to short term lending as

ICDs). Debtors (Receivables) has increased to Rs. 11.7bn in FY15 from just Rs. 3.3bn in FY12; receivables from related parties have

increased to 64% of the total (from just 16% in FY12); 80% of this related party receivables is due from Adani Power

Debt: Total standalone debt has increased to Rs. 117.6bn from Rs. 89.1bn in FY14; debentures have increased to Rs. 41.4bn from

Rs. 19.9bn; there is Rs. 55.6bn of foreign currency loans which has been recently refinanced by way of USD 650mn dollar bond.

Company’s D/E ratio remains comfortable at 1.1x (1x in FY14)

Cashflows: Standalone operating cashflows stood at ~Rs. 26bn in FY15 while interest + repayment (~Rs. 20bn), investments (~Rs.

29bn) and ICDs (~Rs. 15bn) have been the major cash outflows; With most investments & CAPEX completed we estimate cumulative

~Rs. 30bn incremental debt required for FY16-18E (not taking into account Vizhinjam and other likely inorganic acquisitions)

Subsidiary Performance: Dhamra port witnessed a turnaround in its financials (Rs. 1,001mn PAT vs. a loss of 1,719mn in FY14).

Dahej, Hazira and Adani Logistics also witnessed tremendous turnaround in their financials (PAT of Rs. 857mn vs. 127mn for Dahej,

Rs. 704mn vs. loss of Rs. 246mn for Hazira and Rs. 478mn vs. Rs. 297mn for Adani Logistics); these subsidiaries generated a

cumulative EBITDA of Rs. 12bn in FY15

Consolidated Performance: Consolidated performance was robust in FY15 due to addition of Dhamra and stellar performance from

Dahej, Hazira and Adani Logistics (resulting in 33% yoy PAT growth). We expect the consolidated PAT to grow at a CAGR of 25% for

FY15-18E driven by profitability of new assets; consequently we estimate doubling in Consolidated EPS in the same period (from Rs.

11.2/ share in FY15 to Rs. 22/ share in FY18E)

Triggers in the Future: Masterplan for Dhamra provides for building a 100MT port (From the current 25MT), similarly Hazira has only

2 berths constructed of the 5 berths in the masterplan; also, Company has recently won the bid (sole bidder) to develop a 1.2mn TEU

transshipment port at Vizhinjam in Kerala and is likely to acquire a port on the Eastern Coast of India; we have not factored-in all

these in our estimates due to lack of clarity/ information; we believe that these events are likely to be the triggers for the stock in the

future

Valuation Discussion: We continue to value the Company on n SoTP basis; we use DCF to value the port assets and arrive at a

value of Rs. 250/ share for the standalone business (Mundra Port and SEZ business); we use DCF for the other assets and

arrive at a final target price for the stock at Rs. 36/ share (earlier Rs. 394/ share as we rationalize our SEZ revenue outlook). We

continue to remain positive on the stock and maintain our “Buy” rating. BUY with a TP of Rs. 364/ share.

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022

BHARANIDHAR VIJAYAKUMAR [email protected] +91 44 4344 0038

Rating: ◄► Target price: ▼

Page 1


Rs. 318

Target

Rs. 364

Rating

BUY

Page 2

Standalone P&L, Rs. mn FY14 FY15

Volumes, MT 101 111 Growth in volumes led by 13% growth in Coal, 14% growth in Containers and 38% growth in

fertilizers and minerals growth, % 23% 10%

Port Services Revenues 30,715 34,592 13% growth in port services revenues is due to the 10% growth in volumes

Land Lease 2,394 1,021

Income Related to Container Terminal Development 7,249 0 There was a one off infrastructure development income booked in FY14 related to CT3

Construction Income 3,100 3,481

Total Revenues 43,458 39,094

Operating Expenses 12,715 8,855 • There was a one off infrastructure development related expense in FY14 related to CT3

(excluding which the growth in operating expenses was 4%) Employee Cost 1,170 1,576

Other Expenses 2,172 2,588

Total Expenses 16,057 13,019

EBITDA 27,401 26,074

margin, % 63% 67% Margins increase due to operating leverage (13% increase in revenues but only 4%

increase in operating expenses)

Interest Income 6,798 7,382 Large interest income is due to the ~Rs. 65bn of Inter Corporate Deposits to related and

unrelated parties Depreciation 4,557 4,886

EBIT 16,046 13,807

Interest 7,539 7,088

PBT 8,508 6,719

Tax 1,941 (350)

PAT 6,567 7,068

margin, % 15% 18%

Standalone P&L, FY15


Rs. 318

Target

Rs. 364

Rating

BUY

Balance Sheet, Rs. mn FY14 FY15

Share capital 4,168 4,168

Reserves and surplus 89,191 107,863

Non-current liabilities 93,359 112,032

Long-term borrowings 92,095 117,642 ~Rs. 20bn of additional borrowing in FY15 resulted in increased debt

Other long-term liabilities 11,674 10,423 Consists of Rs. 7.7bn of unearned income

Deferred Tax 6,708 7,165

Current liabilities

Trade payables 2,167 6,239

Short-term provisions 3,042 4,570

Total 5,208 10,809

Total Assets 209,044 258,071

Gross Block 108,107 113,240

Net Block 85,372 84,619

Capital work in progress 6,615 6,632

Non-current investments 17,863 47,623 Investment into Dhamra (~Rs. 27bn) has increased FY15’s investment

Long-term loans and advances 43,261 50,340 There has been a ~Rs. 15bn increase in loans to related parties and 3rd parties

Other Current Assets 8,108 9,026 There has been a ~Rs. 2bn increase in accrued revenues

Current assets

Inventories 1,430 1,795

Trade receivables 8,294 7,490

Cash and bank balances 3,998 4,958

Other Current Assets 5,696 6,653

Short-term loans and advances 28,406 38,935

Total 47,825 59,831

Total Liabilities 209,044 258,071

Page 3

Standalone Balance Sheet, FY15


Rs. 318

Target

Rs. 364

Rating

BUY

Mundra Cargo Volumes, MT

Source: Company, Spark Capital Research

Page 4

4 8 9 15 19

27 36

43 44 46 48

9 10 11

15 18

25

35

40 46

54 58

5 10

12

12

14

17

20

17

22

24

31

10

9 8

11

13

13

10

12

12

13

15

29

36 40

52

64

82

101

111

124

137

152

0

20

40

60

80

100

120

140

160

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Vo

lum

es,

MT

Coal Containers Crude Others

4%

13%

23%

8%

11%

39%

23%

18%

2%

21%

Cargo Volumes – Standalone (Mundra)

CAGR %

FY16E-FY18E

CAGR %

FY08-FY15


Rs. 318

Target

Rs. 364

Rating

BUY

Adani Ports & SEZ Consolidated Cargo Volumes, MT


Page 5

29 36 40 52

64 82

101 111

124 137

152

12

17

18

20

0 0

0

0

2

8

8

12

14

16

18

1

4

7

12

15

18

29 36

40

52

66

91

113

144

171

199

229

0

50

100

150

200

250


Vo

lum

es,

MT

Mundra Dhamra Dahej Hazira Kandla Goa Vizag Ennore

11%

18%

13%

12%

32%

298%

90%

63%

21%

Cargo Volumes - Consolidated

CAGR %

FY16E-FY18E

CAGR %

FY08-FY15


Rs. 318

Target

Rs. 364

Rating

BUY

Page 6

Financials - Standalone

Standalone Revenues


Fixed Costs and Variable Costs

8,1

82

11,3

51

13,9

25

18,8

51

24,8

19

33,6

11

43,4

58

39,0

94

48,7

30

51,5

16

58,2

05

41%

9%

41%

34%

24%

13% 13% 11% 11%

19%

0%

10%

20%

30%

40%

50%

0

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY10 FY12 FY14 FY16E FY18E

Rs. M

n

Port Services Revenues Land Lease CT3 Development

Construction Income Port Revenue, growth %

2,8

28

3,7

34

4,3

14

5,7

51

7,7

00

8,9

08

16,0

57

13,0

19

14,4

22

15,5

35

17,5

40

0

5,000

10,000

15,000

20,000

25,000


Rs. M

n

Variable Costs Fixed Costs

EBITDA and EBITDA margins PAT and PAT margins

5,3

54

7,6

17

9,6

11

13,1

00

17,1

19

24,7

02

27,4

01

26,0

74 34,3

09

35,9

81

40,6

65

65%

67%

69% 69% 69%

73%

63%

67%

70% 70% 70%

56%

58%

60%

62%

64%

66%

68%

70%

72%

74%

76%

0

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16EFY17EFY18E

Rs. M

n

EBITDA EBITDA, %2,1

35

4,6

12

7,0

10

9,8

62

11,7

73

17,5

42

20,1

62

21,8

32

28,7

07

31,4

38

37,0

20

26%

41%

50% 52% 47%

52%

46%

56% 59% 61%

64%

0%

10%

20%

30%

40%

50%

60%

70%

0

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY10 FY12 FY14 FY16E FY18E

Rs. M

n

PAT PAT, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 7

Per Tonne Analysis – Adani Ports & Gujarat Pipavav

FY2014 FY2015

355

146

209

369

204

165

0

50

100

150

200

250

300

350

400

Revenues Per Tonne Cost per tonne EBITDA per tonne

Rs. p

er

To

nn

e

ADSEZ

GPPV

362

147

215

403

188

215

0

50

100

150

200

250

300

350

400

450

Revenues Per Tonne Cost per tonne EBITDA per tonne

Rs. p

er

To

nn

e

ADSEZ

GPPV


Rs. 318

Target

Rs. 364

Rating

BUY

Loans & Advances, FY15 Loans and Advances to related parties, end of year, Rs. mn

*Loans and Advances to these entities are interest bearing, all other loans are on interest free basis; Source: Company

Page 8

Rs. Mn 2008 2009 2010 2011 2012 2013 2014 2015

Adani Logistics Ltd.* 0 0 1,499 1,865 2,034 4,625 11,472 13,405

Adani Agri Fresh Ltd.* 0 0 0 0 0 0 9,040 10,649

The Dhamra Port Company Ltd.* 0 0 0 0 0 0 9,981

Adani Kandla Bulk Terminal Pvt. Ltd.* 0 0 0 0 0 0 3,245 9,277

Adani Hazira Port Pvt. Ltd. 0 0 0 0 4,747 3,463 253 2,780

Adani Enterprises Ltd.* 0 3 0 0 0 0 2,500 2,500

Adani Murmugao Port Terminal Pvt. Ltd. 0 0 0 0 713 1,144 832 2,411

Karnavati Aviation Pvt. Ltd. 0 0 300 424 1,120 1,525 1,462 1,429

Adani International Container Terminal Pvt. Ltd. 0 0 0 0 472 0 840

Adani Vizag Coal Terminal Pvt. Ltd. 0 0 0 0 44 1,249 1,188 735

Adani Ennore Container Terminal Pvt. Ltd. 0 0 0 0 0 0 647

Mundra SEZ Textile and Apparel Park Pvt. Ltd. 0 0 0 45 53 137 139 246

Adani Petronet (Dahej) Port Pvt. Ltd.* 0 0 0 0 204 1 96

Dholera Infrastructure Pvt. Ltd. 0 0 88 88 88 88 88 88

Mundra International Airport Pvt. Ltd. 0 0 0 65 80 85 96 87

Adani Hospitals Mundra Pvt. Ltd. 0 0 0 0 0 0 7 41

Adani Properties Pvt. Ltd. 0 10 0 0 10 10 10 10

Chemoil Adani Pvt. Ltd.* 0 0 0 0 0 0 1,928 2

MPSEZ Utilities Pvt. Ltd. 0 0 0 0 57 54 57 2

Mundra Port Pty Ltd., Australia 0 0 0 0 24 606 0 0

Adani Abbot Point Terminal Pty Ltd, Australia 0 0 0 0 33 0 0

Adani Power* 0 2 0 0 540 0 0

Adani Mundra SEZ Infrastructure Pvt. Ltd. 261 707 0 108 249 0 0

Shanti Builders 0 52 0 0 12 0 0

Total 261 775 1,886 2,593 9,905 13,559 32,315 55,224

26%

21%

20%

18%

5%

5% 5%

Adani Logistics Ltd.

Adani Agri Fresh Ltd.

The Dhamra Port Company Ltd.

Adani Kandla Bulk Terminal Pvt. Ltd.

Adani Hazira Port Pvt. Ltd.

Adani Enterprises Ltd.

Adani Murmugao Port Terminal Pvt. Ltd.

Loans & Advances to Related Parties - Standalone

Loans and Advances, FY15, Rs. mn

Related Party 40,172 73%

Non Related

Party 15,052 27%

Total 55,224


Rs. 318

Target

Rs. 364

Rating

BUY

Long Term Investments, Rs. mn

Source: Company

Investments, FY15

Page 9

Rs. mn FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

The Dhamra Port Company Limited 27,427

Adani Hazira Port Private Limited 5 240 1,641 3,692 6,500 7,155

Adani Logistics Limited 1,751 1,982 3,119 3,119 3,119 3,251 3,251 3,251

Adani International Container Terminal 0 5 272 3,102 3,102

Adani Petronet (Dahej) Port Private Limited 212 321 1,927 2,087 2,561 2,562 2,562 2,562

Adani Vizag Coal Terminal Private Limited 0 5 48 48 1,013

Adani Murmugao Port Terminal Private Limited 1 313 328 858 858 858

MPSEZ Utilities Private Limited 0 0 0 525 525 525 525 525

Karnavati Aviation Private Limited 10 10 10 50 50 50 200 450

Kutch Railway Company 400 400 400 400 400 400 400 400

Adinath Polyfills Private Limited 174 115 195 385 385 385 385 385

Adani CMA Mundra Terminal Private Limited 304

Adani Kandla Bulk Terminal Private Limited 0 0 0 0 148

Mundra SEZ Textile and Apparel Park 25 25 25 25 25 25 25 25

Mundra International Airport Private Limited 5 5 5 5 5 15

Adani Hospitals Mundra Private Limited 1 3

Adani Warehousing Service Private Limited 1 1 1

Adani Ennore Container Terminal Private

Limited 1 1

Mundra Solar Technopark Private Limited 1

Adani Shipyard Private Limited 1 1 1 1 0

Mundra Port Pty Ltd. 2,451

Adani Abbot Point Terminal Holding Pty Ltd. 6,874

Total 2,571 2,852 5,686 7,150 18,375 12,073 17,863 47,623

60% 16%

7%

7%

6% 2% 2%

The Dhamra Port Company Limited

Adani Hazira Port Private Limited

Adani Logistics Limited

Adani International Container Terminal

Adani Petronet (Dahej) Port Private Limited

Adani Vizag Coal Terminal Private Limited

Adani Murmugao Port Terminal Private Limited

Long Term Investments - Standalone


Rs. 318

Target

Rs. 364

Rating

BUY

Debt – Standalone

Source: Company

Page 10

Debt and Return Ratios - Standalone

Debt/ Equity RoE, RoCE

3,002 7,362 11,946 10,763

46,965

50,216 57,934

55,634

18,645 22,750

31,572 27,098

61,727

83,353 89,060

117,642

0

20,000

40,000

60,000

80,000

100,000

120,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Rs. M

n

Debentures Rupee Loans Foreign Currency Loans Short Term Debt

0.7 0.8

0.9

0.6

1.2 1.2

1.0 1.1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4


D/E

8.2%

16.6%

21.8%

25.3% 24.7%

29.4%

25.1%

21.3%

5.8%

13.2% 13.2% 15.2%

13.9% 14.2% 14.1% 12.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%


RoE, % RoCE, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 11

Cash Flows, Rs. mn FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Sources of Funds

Operating Cash before Working Capital 7,082 9,135 11,861 17,044 24,100 27,646 26,473 34,321 36,027 40,378

Dividend Income 18 13 62 20 70 118 20 0 0 0

Interest Income 988 1,137 688 268 509 1,846 7,643 7,581 7,522 7,406

Equity Raised 0 0 0 0 0 9,901 0 0 0 0

Net Debt 2,833 9,709 (5,162) 30,838 20,094 (234) 27,843 (19,761) (20,911) (14,886)

Sources of Funds 10,921 19,994 7,449 48,169 44,773 39,278 61,980 22,007 22,476 33,198 \

Application of Funds (positive numbers indicate outflow of cash)

Taxes 226 44 (10) 2,501 3,552 4,857 4,317 5,842 12,246 19,717

Working Capital (764) (1,259) (720) 1,668 6,850 6,772 2,175 1,641 745 1,355

CAPEX in Gross Block 12,313 13,979 11,200 19,556 2,414 2,654 (955) 0 0 0

Investments into Susidiaries 10,033 3,530 2,958 12,460 6,399 3,261 24,024 3,408 2,500 0

Investment in liquid short term instrument (16,083) (3,477) (7,331) 2,499 (1,651) (10,736) (769) 0 0 0

Inter Corporate Deposits Given (44) 4,756 (1,241) 3,964 17,875 29,922 20,929 0 0 0

Interest 1,968 1,592 1,577 2,534 4,296 4,747 6,332 8,296 7,178 6,168

Dividend Payment 1,407 1,404 2,406 1,499 1,629 2,422 2,422 2,635 2,635 2,635

Application of Funds 9,056 20,569 8,838 46,681 41,364 43,899 58,473 21,552 25,057 30,072

Net Cash 1,865 (575) (1,389) 1,489 3,409 (4,621) 3,507 5,320 (7,665) 3,024

Free Cash Flow to Firm 2,390 (7,302) 7,693 (25,337) (10,830) (7,239) (15,603) 31,005 28,031 26,880

We are not assuming any

Inter Corporate Deposits

going forward and yet we

estimate that the Company

would take on additional ~Rs.

30bn of debt in the next 3

years

With most projects

completed, CAPEX is

required only for Ennore, CT4

and Vizhinjam

With a comfortable Debt/

Equity position, Company will

not be under undue stress

taking-on more debt

Likelihood of Company

raising monies in the Capital

market is also high given the

capital requirement

Cash Flows - Standalone


Rs. 318

Target

Rs. 364

Rating

BUY

Page 12

Working Capital - Standalone

Standalone

Receivables

Source: Company

Working Capital, Days FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Inventory Days 9 7 8 8 8 9 12 15

Debtor Days 132 82 48 41 33 50 79 74

Short Term Loans & Advances Days 59 47 100 73 24 106 232 314

Other Current Assets Days 20 16 15 9 9 88 106 58

Creditor Days 114 91 87 47 22 16 18 39

Other Current Liabilities Days 35 20 16 18 27 30 30 36

Working Capital including Loans & Advances 71 41 69 65 26 206 381 386

Working Capital without Loans & Advances 48 (25) (48) 3 (100) (30) 63 55

1,969 1,096 532 1,150 541

3,678

7,338 7,500 2,963 2,116

1,580 2,688

3,345

8,034

12,700 11,734 66%

52%

34%

43%

16%

46%

58% 64%

0%

10%

20%

30%

40%

50%

60%

70%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


Receivables from Related Parties Receivables from Others % of related party receivables


Rs. 318

Target

Rs. 364

Rating

BUY

Page 13

Subsidiaries – Dhamra Port

Volumes & Growth %


Revenues & Growth %

*for FY15 the numbers are for 9 months period from June 23, 2014 – March 31, 2015

EBITDA & Growth %


PAT & Growth %


5.0

11.1

14.3 15.5

16.7 18.0

19.5

121%

29%

8% 8% 8% 8%

0%

20%

40%

60%

80%

100%

120%

140%

0.0

5.0

10.0

15.0

20.0

25.0

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Metr

ic T

on

ne

Volumes growth, %

1,951

5,024

7,314 7,182

9,402

10,662

12,091

46%

-2%

31% 13% 13%

-10%

0%

10%

20%

30%

40%

50%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


Rs. M

n

Revenues growth, %

(128)

2,038

3,868 4,575

6,111 6,930

7,859

-7%

41%

53%

64% 65% 65% 65%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


Rs. M

n

EBITDA margin, %

(4,581)

(3,400)

(1,719)

1,001 1,476

2,385

3,325

-26% -49%

-158%

47% 62%

39%

-200%

-150%

-100%

-50%

0%

50%

100%

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000


Rs.M

n

PAT growth, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 14

Subsidiaries – Dahej Port

Volumes & Growth %


Revenues & Growth %

EBITDA & Growth % PAT & Growth %

2.1

7.6 7.9

12.4 14.0

16.0

18.0 253%

4%

57%

13% 14% 13%

0%

50%

100%

150%

200%

250%

300%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0


Metr

ic T

on

ne

Volumes growth, %

885

2,682 2,888

4,847

5,682

6,753

7,901 203%

8%

68%

17% 19% 17%

0%

50%

100%

150%

200%

250%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


Rs. M

n

Revenues growth, %

496

1,615 1,676

3,026

3,661

4,351

5,091

56%

60%

58%

62%

64% 64% 64%

50%

52%

54%

56%

58%

60%

62%

64%

66%

0

1,000

2,000

3,000

4,000

5,000

6,000


Rs. M

n

EBITDA margin, %

(311)

430

127

857

1,527

2,029

2,618

-70%

572%

78% 33% 29%

-200%

-100%

0%

100%

200%

300%

400%

500%

600%

700%

(500)

0

500

1,000

1,500

2,000

2,500

3,000


Rs.M

n

PAT growth, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 15

Subsidiaries – Hazira Port

Volumes & Growth %


Revenues & Growth %


0.0

1.0

3.7

7.2 8.0

8.9

10.1 266%

93%

11% 12% 13%

0%

50%

100%

150%

200%

250%

300%

0.0

2.0

4.0

6.0

8.0

10.0

12.0


Metr

ic T

on

ne

Volumes growth, %

0 747

2,664

4,925

6,153 6,901

7,789 257%

85%

25% 12% 13%

0%

50%

100%

150%

200%

250%

300%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


Rs. M

n

Revenues growth, %

0

724

1,611

3,454

4,122

4,624

5,218

0%

97%

60%

70% 67% 67% 67%

0%

20%

40%

60%

80%

100%

120%

0

1,000

2,000

3,000

4,000

5,000

6,000


Rs. M

n

EBITDA margin, %

0 6

(246)

704 742

1,101

1,597

5%

48%

45%

0%

10%

20%

30%

40%

50%

60%

(500)

0

500

1,000

1,500

2,000


Rs.M

n

PAT growth, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 16

Subsidiaries - Adani Logistics

Revenues & Growth %

Source: Company


1,231

2,707

4,271

6,341 120%

58%

48%

0%

20%

40%

60%

80%

100%

120%

140%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY12 FY13 FY14 FY15

Rs. m

n

Revenues growth, %

69

275

580

768

6%

10%

14%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

100

200

300

400

500

600

700

800

900

FY12 FY13 FY14 FY15

Rs. M

n

EBITDA margin, %

(65)

101

297

478 195%

61%

0%

50%

100%

150%

200%

250%

(100)

0

100

200

300

400

500

600

FY12 FY13 FY14 FY15

Rs. M

n

PAT growth, %


Rs. 318

Target

Rs. 364

Rating

BUY

Page 17

Consolidated PAT & EPS

Consolidated PAT

Consolidated Earnings Per Share

Rs. mn FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Standalone 11,773 17,542 20,162 21,832 28,707 31,438 37,020

CT3 0 0 (200) (2) 256 351 461

CT4 0 0 0 0 0 (945) (845)

Dhamra 1,001 1,476 2,385 3,325

Dahej (311) 430 127 857 1,527 2,029 2,618

Hazira 0 6 (246) 704 742 1,101 1,597

Goa 0 0 0 (282) 225 127 416

Kandla 0 0 0 (58) (74) 738 1,780

Vizag 0 0 0 (202) 164 127 251

Ennore 0 0 0 0 0 133 537

Others (709) (1,634) (2,514) (573) (605) (605) (605)

Consolidated 10,833 16,232 17,396 23,143 31,853 36,423 45,496

5.7 8.5 9.7 10.5

13.9 15.2 17.9

5.2

7.8 8.4

11.2

15.4

17.6

22.0

0.0

5.0

10.0

15.0

20.0

25.0


Rs./

Sh

are

Standalone CT3 CT4 Dhamra Dahej Hazira Goa Kandla Vizag Ennore Others Consolidated


Rs. 318

Target

Rs. 364

Rating

BUY

Page 18

Cash Flows - Consolidated

Cashflows – Consolidated, Rs. mn

Sources of Funds FY09 FY10 FY11 FY12 FY13 FY14 FY15

Operating Cash before Working Capital 7,019 9,262 11,802 19,959 23,811 29,259 39,529

Dividend Income 19 14 62 20 75 136 112

Interest Income 972 1,253 757 373 572 1,860 7,407

Equity Raised 26 720 166 456 (80) 10,061 -

Net Debt 7,297 9,465 (1,861) 136,018 49,460 6,546 12,780

Government Grant 55 63 - 23 - - 51

Total 15,389 20,776 10,927 156,849 73,839 47,862 59,879

Application of Funds

Taxes 245 85 33 2,524 3,735 5,200 4,868

Working Capital (692) (1,309) (324) 5,439 6,285 12,740 4,010

CAPEX in Gross Block 15,138 18,771 18,257 45,472 38,314 11,022 12,289

Investments into Susidiaries 9,562 2,685 215 3,126 73 - 22,427

Investment in liquid short term instruments (15,953) (5,221) (6,109) 5,908 (5,475) (10,719) (343)

Investment in Discontinued Operations - - - 84,728 - - -

Intercorporate Deposits Given 250 3,050 (1,840) (80) 14,633 26,893 (1,923)

Interest 2,072 1,925 1,982 5,235 6,373 6,360 12,775

Dividend Payment 1,407 1,404 1,603 1,499 1,630 2,422 2,422

Total 12,029 21,389 13,817 153,849 65,569 53,919 56,525

Net Cash 3,360 (613) (2,890) 3,000 8,270 (6,056) 3,353

Free Cash Flows to Firm (17,483) (14,019) (4,540) (36,521) (39,229) (26,596) (2,143)


Rs. 318

Target

Rs. 364

Rating

BUY

Page 19

SoTP Valuation

ADSEZ SoTP Valuation, Rs. mn

Asset Stake, % Method Equity

Value

Value to

ADSEZ

Per Share

Value (Rs.) % to Total

Stand Alone Entity - Mundra Port & SEZ 100% FCFE with CoE of 12% 516,750 516,750 250 69%

Adani International Container Terminal Pvt. Ltd.

(CT3) 50% FCFE with CoE of 12% 13,502 6,751 3 1%

Adani CMA Mundra Terminal Pvt. Ltd. (CT4) 50% FCFE with CoE of 13% 6,016 3,008 1 0%

Adani Petronet (Dahej) Port Pvt. Ltd. 74% FCFE with CoE of 12% 45,014 33,310 16 4%

Adani Hazira Port Terminal Pvt. Ltd. 100% FCFE with CoE of 12% 60,584 60,584 29 8%

Adani Murmugao Port Terminal Pvt. Ltd. 74% FCFE with CoE of 12% 9,232 6,832 3 1%

Adani Vizag Coal Terminal Pvt. Ltd 100% FCFE with CoE of 12% 4,159 4,159 2 1%

Adani Kandla Bulk Terminal Pvt. Ltd 74% FCFE with CoE of 12% 17,285 12,791 6 2%

Dhamra Port 100% FCFE with CoE of 12% 84,125 84,125 41 11%

Adani Ennore Container Terminal Pvt. Ltd. 100% FCFE with CoE of 13% 18,609 18,609 9 2%

Adani Logistic Ltd. 100% 15x FY15 earnings 7,167 7,167 3 1%

Total 782,443 754,087 364 100%


Rs. 318

Target

Rs. 364

Rating

BUY

Page 20

Financial Summary – Standalone

Abridged Financial Statements Key metrics

Rs. mn FY14 FY15 FY16E FY17E FY18E FY14 FY15 FY16E FY17E FY18E

Profit & Loss Growth Ratios

Revenues 43,458 39,094 48,730 51,516 58,205 Cargo Volume 101.1 110.9 124.1 137.1 152.4

EBITDA 27,401 26,074 34,309 35,981 40,665 Revenues 29.3% -10.0% 24.7% 5.7% 13.0%

Other Income 6,798 7,382 7,459 7,406 7,420 EBITDA 10.9% -4.8% 31.6% 4.9% 13.0%

Depreciation 4,557 4,886 4,886 4,886 4,886 PBT 17.0% -2.8% 34.5% 9.5% 17.1%

EBIT 29,641 28,570 36,882 38,500 43,199 PAT 14.9% 8.3% 32.3% 9.5% 17.1%

PBT 22,103 21,482 28,886 31,623 37,031

PAT 20,162 21,832 28,886 31,623 37,031 Performance ratios

RoA (%) 10.6% 9.7% 11.7% 12.9% 15.2%

Balance Sheet RoE (%) 25.1% 21.3% 23.1% 20.7% 20.1%

Net Worth 93,359 112,032 138,283 167,271 201,668 RoCE (%) 15.5% 12.7% 14.9% 15.7% 17.7%

Total Debt 92,095 117,642 97,882 76,971 62,084 Total Assets Turnover (x) 0.2 0.2 0.2 0.2 0.2

Receivable under long term

lease 11,674 10,423 10,423 10,423 10,423 Fixed Assets Turnover (x)

0.5 0.5 0.6 0.7 0.8

Deferred Tax Liability (net) 6,708 7,165 1,290 (11,018) (30,858) Working capital Turnover (x) 1.0 0.8 1.0 1.0 1.1

Total Networth & Liabilities 203,836 247,262 247,877 243,647 243,317 Financial stability ratios

Gross Fixed assets 108,107 113,240 113,240 113,240 113,240 Net Debt to Equity (x) 0.9 1.0 0.7 0.4 0.3

Net fixed assets 85,372 84,619 79,733 74,847 69,961 Current ratio (x) 9.2 5.5 5.7 5.0 4.7

CWIP 6,615 6,632 6,632 6,632 6,632 Working capital days 358 458 383 349 338

Loans and Advances 51,369 59,366 59,366 59,366 59,366 Inventory & Debtor days 368 512 425 415 391

Investments 17,863 47,623 51,030 53,530 53,530 Creditor days 44 101 82 86 91

Cash and bank balances 3,998 4,958 5,414 2,833 5,959 Interest cover (x) 3.9 4.0 4.6 5.6 7.0

Other receivables 43,827 54,873 56,684 58,617 62,370 Valuation metrics

Current Liabilities 5,208 10,809 10,983 12,179 14,501 Fully Diluted shares (mn) 2,070 2,070 2,071 2,072 2,073

Net current assets 42,617 49,022 51,115 49,271 53,828 Fully diluted M. Cap (Rs.mn) 636,954

Total Assets 203,836 247,262 247,877 243,647 243,317 Fully Diluted EPS (Rs.) 9.7 10.5 13.9 15.3 17.9

P/E (x) 31.6 29.2 22.1 20.1 17.2

Cash Flows EV (Rs.mn) 714,371 725,051 749,638 729,422 711,092

Cash flows from Operations 16,016 19,982 34,254 30,342 26,815 EV/ EBITDA (x) 26.1 27.8 21.8 20.3 17.5

Cash flows from Investing (23,136) (35,565) (3,408) (2,500) - BV/ share (Rs.) 45.1 54.1 66.8 80.7 97.3

Cash flows from Financing 2,499 19,089 (30,391) (30,423) (23,689) Price to BV (x) 6.8 5.7 4.6 3.8 3.2


Rs. 318

Target

Rs. 364

Rating

BUY

Page 21

Financial Summary – Consolidated

Abridged Financial Statements Key metrics

Rs. mn FY14 FY15 FY16E FY17E FY18E FY14 FY15 FY16E FY17E FY18E

Profit & Loss Growth Ratios

Revenues 48,240 61,520 76,712 86,674 100,833 Cargo Volume 112.8 144.2 171.2 199.1 229.1

EBITDA 29,203 39,023 51,058 56,819 65,937 Revenues 34.9% 27.5% 24.7% 13.0% 16.3%

Other Income 6,836 6,856 6,300 6,378 6,835 EBITDA 22.9% 33.6% 30.8% 11.3% 16.0%

Depreciation 6,495 9,117 9,630 10,351 10,640 PBT 18.0% 26.5% 35.5% 15.1% 25.7%

EBIT 29,545 36,763 47,729 52,846 62,132 PAT 6.2% 33.5% 39.7% 15.1% 25.2%

PBT 19,777 25,012 33,901 39,016 49,025 PAT after MI 7.2% 33.0% 38.4% 14.3% 24.3%

PAT after MI 17,396 23,143 32,032 36,608 45,507 Performance ratios

Balance Sheet RoA (%) 7.8% 8.4% 10.1% 11.4% 14.0%

Net Worth 87,681 107,678 138,218 173,549 218,278 RoE (%) 22.6% 23.7% 26.1% 23.5% 23.2%

Minority Interest 1,437 1,590 2,026 2,778 4,030 RoCE (%) 13.2% 13.3% 15.1% 16.5% 19.1%

Total Debt 116,940 151,553 135,218 112,603 95,991 Total Assets Turnover (x) 0.2 0.2 0.2 0.3 0.3

Deferred Tax Liability (net) 6,744 8,590 1,973 (11,048) (32,171) Fixed Assets Turnover (x) 0.4 0.4 0.4 0.5 0.6

Other liabilities 28,069 43,330 43,330 43,330 43,330 Working capital Turnover (x) 1.0 1.1 1.1 1.1 1.3

Total Networth & Liabilities 240,870 312,741 320,765 321,212 329,457 Financial stability ratios

Gross Fixed assets 158,416 221,503 219,858 237,358 242,358 Net Debt to Equity (x) 1.3 1.3 1.0 0.6 0.3

Net fixed assets 131,226 179,272 168,639 175,924 170,419 Current ratio (x) 10.7 9.6 35.8 19.2 15.0

Investments 575 574 574 574 574 Working capital days 396 373 354 326 295

Loans and Advances 30,928 24,901 24,901 24,901 24,901 Inventory & Debtor days 441 421 364 344 322

Goodwill on Cosolidation 404 25,997 25,997 25,997 25,997 Creditor days 45 48 10 18 27

Cash and bank balances 5,139 6,338 1,557 56 22,719 Interest cover (x) 3.0 3.1 3.5 3.8 4.7

Receivables & other current

assets 58,251 70,985 76,523 81,763 88,957 Valuation metrics

Current Liabilities 5,901 8,080 2,184 4,261 7,448 Fully Diluted shares (mn) 2,070 2,070 2,070 2,070 2,070

Net current assets 57,489 69,242 75,896 77,558 104,228 Fully diluted M. Cap (Rs.mn) 658,292

Total Assets 240,870 312,742 320,765 321,212 329,457 Fully Diluted EPS (Rs.) 8.4 11.2 15.5 17.7 22.0

P/E (x) 37.8 28.4 20.6 18.0 14.5

Cash Flows EV (Rs.mn) 756,608 770,092 803,507 791,953 770,839

Cash flows from Operations 11,319 30,650 44,492 58,377 66,499 EV/ EBITDA (x) 25.9 19.7 15.7 13.9 11.7

Cash flows from Investing (25,100) (24,931) (10,358) (9,000) 7,920 BV/ share (Rs.) 42.4 52.0 66.8 83.8 105.4

Cash flows from Financing 7,725 (2,366) (36,344) (48,714) (49,591) Price to BV (x) 7.5 6.1 4.8 3.8 3.0


Rs. 318

Target

Rs. 364

Rating

BUY

Page 22

Recommendation History

Report Date CMP (Rs.) TP (Rs.) Recommendation

05/May/15 345 394 Buy

29/Jan/15 338 394 Buy

16/Sep/14 279 349 Buy

07/Aug/14 266 349 Buy

24/Jul/14 276 349 Buy

28/May/14 215 226 Add

28/Jan/14 145 157 Add

29/Oct/13 145 157 Add

17/May/13 161 172 Add

04/Feb/13 150 160 Add

25/Oct/12 130 150 Buy

Report Date CMP (Rs.) TP (Rs.) Recommendation

03/Aug/12 121 150 Buy

02/Jul/12 119 150 Buy

25/May/12 114 150 Buy

17/May/12 114 150 Buy

0

50

100

150

200

250

300

350

400

450

Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15

Historical Target

Adani Ports & SEZ


Rs. 318

Target

Rs. 364

Rating

BUY

Page 23

Disclaimer (1/2)

Spark Disclaimer

Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities and

infrastructure advisory services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in the last five years. We

have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of

time.

Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered

with SEBI as Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure

advisory services.

This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should

be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of

companies referred to in this document.

Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies

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material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal.

Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this

document. Spark Capital , its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or

deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit

investment banking or other business from, any company referred to in this report.

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark

Capital. While we would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information.

Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective

directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents

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or reliance on this report.

Absolute

Rating

Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year

horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year

horizon SELL Stock expected to fall >10% over a 1-year horizon


Rs. 318

Target

Rs. 364

Rating

BUY

Page 24

Disclaimer (2/2)

Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,

Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

Spark Capital’s ownership/any other financial interest in the company covered No

Associates of Spark Capital’s ownership more than 1% in the company covered No

Any other material conflict of interest at the time of publishing the research report No

Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:

Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research

analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

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This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under

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Adani Ports & SEZ CMP Target Rating - Spark Capitalmailers.sparkcapital.in/uploads/bharani/Adani Ports & SEZ...Adani Ports & SEZ CMP Rs. 318 Target Rs. 364 Rating BUY Balance Sheet,

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