Adani Ports and SEZ Q3FY18 Concall Summaries

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Financial Highlights

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  • The ports’ operating revenue in Q3 went up by 15% and registered 1940 crores. 
  • For the nine-month period, the same ports’ revenue was up 8% to 5446 crores.
  • The SEZ and port development revenue, combined in Q3 was 100% increase, 400 crores and for the nine months, it was 1650 crores. 
  • The revenue of the logistics front has grown by 10% in nine months and said 3% in this quarter.
  • Increment of EBITDA margin to 70% in FY ‘18 as guided earlier and CAPEX for FY ‘18 will be in the range of Rs. 2500 to 2800 crores. 
  • The total EBITDA registered a growth of 26% and stands at about 1800 crores in this quarter and about 5300 crores in nine months, which is a 29% increase as far the nine months’ period is concerned. 
  • The EBITDA margin stands at 68% against 64% in Q3 FY ‘17 and for the nine months’ period, it stands at 68% as against 66% in the nine-month period of FY ’17.
  • Ports EBITDA grew from 68% to 70% in Q3, another addition of 200 basis points
  • In the nine- month period, it was 70% which grew up by 1% from 69%.
  • In EBITDA, there is an increase of 23% against the cargo growth of 16%. 
  • On a year-on-year basis, operating income in Quarter-3 increased by 22% to Rs. 2689 crores while EBITDA after adjusting for Forex gain or loss increased by 26% to Rs. 1784 crores. 
  • Margins improved by 400 basis points to 68%, profit before tax during the same period increased by 48% to Rs. 1439 crores and profit after tax increased by 18% to Rs. 994 crores thus translating into a earnings per share of Rs. 4.8.
  • Profit after tax was Rs. 2745 crores, thus translating into an EPS of Rs. 13.26.
  • A small expenses of about 54 crores in this quarter which leads to the total income, after adjusting the SEZ expenses, to be 2635 crores, a growth of 19%. Total income for the nine-month period is about 7700 crores with a growth of 24. 
  • The logistics income grew by 3% in the quarter and 10% for nine months, it was about 200 crores in Q3 and about 600 crores in nine months. 
  • Australia’s operating income registered about 100 crores in Q3 and about 300 crores in nine months, and there is a small other income of about 48 crores in Q3 and about 140 crores in nine months. 
  • With this, the total income grew by 22% to 2689 crore and in the nine months, it grew by 31% to 8140 crore.
  • PBT after exceptional items stands increased by 48% to 1439 crores for the quarter.
  • PBT stands at a 30% growth, close to 4000 crores mark for the nine-months period.
     
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Cash Flows and Payout:

  • In FY ‘17, Rs. 315 cr was distributed as payout, which was 47% of our free cash flow. 
  • In FY ‘18 on a conservative basis, there will be a generation of a free cash flow of 1200 to 1500 crores against Rs. 670 crores generated in FY ‘17. 
  • Next year, subject to board approval, expectation of rewarding shareholders by distributing similar percentage of free cash flow. This will translate into doubling of FY ‘17 payout of Rs. 315 crores.
  • The remaining free cash flow will be used to reduce debt and further improve the net debt to EBITDA ratio.

Growth:

  • For the nine months ending December 2017, operating revenue grew by 31% to Rs. 8140 crores while EBITDA after adjusting Forex gain or loss grew by 29% to Rs. 5277 crores. 
  • Margins improved by 200 basis points to 68%. 
  • The gross finance cost is flat for this Quarter and has shown a slight increase of 5% in the nine-month period, if you give adjustment of Kattupalli, that will show about 991 crores, which is there as per the published results, and PAT for the nine-month period is at 2745 crore, which is about flat compared to previous nine-months in spite of a very large taxation incidence. 
  • In Q3FY18, it actually registered an 18% growth to 994 crores. 
  • There is a flat performance for PAT for nine months and a growth of 18%. 

Taxation 

  • Tax provision is about a percentage higher, instead of the 28 , it is about 30 , that is because of the SEZ income, the board development income. 
  • On a normalized basis (for the 12-month ) in terms of any additional bulk incomes like that by SEZ might push it for that particular quarter, otherwise, the range will be around 28 to 29. 

Volumes

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  • Cargo volume in Q3 of FY ‘18 grew by 16% year-on-year against the 4.4% cargo volume growth achieved by major ports. 
  • Coal volumes at Mundra grew by 9%, at Hazira by 41%, and at Dahej by 70%. In container segment, our growth was 29% compared to major ports growth of 8%. 
  • Container volumes at Mundra grew by 26%, at Hazira it grew by 31% and at Kattupalli by 52%.
  • Cargo volumes in Quarter-3 as compared to Quarter-2 of grew by 11%. This was again led by all-round growth in the major cargo that company handled.
  • Expectation of cargo volumes to grow one-and-a-half times of all India cargo growth and in container segment, the growth will be more than two times growth of container volumes on all India basis.
  • Total handling TEU in Hazira for Quarter-3 was 131,900 and for Kattupalli it was 127,500 TEUs
  • Breakdown of total handling TEUs at Mundra:- 
    • MICT it was 275,000
    • ForCT2 it was 264,000
    • for CT3 that is MSC terminal it was 363,000
    • for CMA terminal, it was 150,000. 
  • Q3FY18 saw a sharp recovery in coal volumes and almost a 13% growth.
  • Trans-shipment growth in Mundra port has been almost 40% in trans-shipment volume compared to last year and that is mainly because MSC has increased their vessel sizes in Mundra on their current services and also that they have added a new service in Mundra.
  • 0.6 million ton increment in growth because of this normalization of HMEL(HPCL-Mittal Energy Limited).
  • Total volume growth for this quarter is about 16%, but the revenue growth is not more than 15%.
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Business Updates

  • All major commodities handled by the company registered a double-digit growth. 
  • Coal grew by 13%, crude grew by 10%.  
  • The larger ports continue to grow, Mundra grew by 17% while Hazira grew by 9%, and Kattupalli grew by 45%. 
  • Dahej, which had a de-growth in Quarter-2 is back on growth trajectory and registered a growth of 93%.
  • Company started handling Agri products at Dahej port.
  • Overall coal grew by 22%, crude grew by 19% and container grew by 7%. 
  • During the nine months of current fiscal year, APSEZ handled cargo volumes of 135 million metric tons, registering a year-on-year volume growth of 7%. This is against 3.6% growth registered by major ports. 
  • While containers grew by 22% other bulk cargo grew by 8%. Today, 62% of the volumes are stable and long-term cargo compared to 61% at the end of Q2FY18
  • Expectation of starting expansion from next quarter onwards in Kattupalli. Phase-1 will be construction of liquid tanks along with railway line and the bulk handling facility mainly for fertilizer, Agri, and steel products. Expected CAPEX of not more than 800 crores to 900 crores over the course of two years.

Vizag Terminal

  • Vizag as is not being profitable as isn’t being operative for some time. It is expected that  in the next quarter or five months, terminal might be surrendered and losses will be seized.
  • The impact of impairment of Vizag terminal at a consolidated basis is about Rs 156 Cr , however, there is a tax benefit on that of Rs 72 crores, and therefore, the real impact on our P&L would be actually only Rs 83  Cr after taking the tax break of Rs 72 Cr. 
  • In a similar manner, in APSEZ actual net impact on P&L is Rs 225 Cr on a standalone basis because of an investment from APSEZ into that company as well as a loan from APSEZ into that company.
  • It didn’t go into the consolidation is because certain losses which were there in the Vizag terminal were already accounted for in the earlier period in the consolidated level.

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