Shares of Adani Ports and Special Economic Zone Ltd have outperformed the benchmark Sensex since it announced its quarterly results. The share price has gone up by 5% so far this month, compared with a 0.6% increase in the S&P BSE 100 index.
The outperformance is justified. Consolidated revenues in the three months ended 31 March increased by 50% over the same period last year to Rs.1,681 crore.
Total volumes handled increased by 26% over last year’s quarter to 36.4 million tonne helped mainly by strong growth in cargo handled at the Dahej and Hazira ports. Volumes at the Mundra port were lower than anticipated on account of lower crude oil volumes. Better-than-expected overall realizations also helped.
Slower pace of growth in operating expenses as a percentage of revenues boosted operating margins by about 700 basis points to 66%. One basis point is one-hundredth of a percentage point. But decline in other income, higher finance expenses and depreciation costs meant that the robust revenue growth did not translate into commensurate net profit growth. Still, year-on-year net profit growth of 25% leaves little to complain about.
Another positive factor is lower debt. As Elara Securities (India) Pvt. Ltd points out in its post-results note, stand-alone debt fell by Rs.2,500 crore year-on-year to Rs.9,800 crore, owing to debt repayment taken for the Dhamra Port acquisition.
Accordingly, “consolidated debt at Rs.17,500 crore has reduced from Rs.20,700 crore as on September 2014, led by reduction in stand-alone debt,” said Elara. Adani Ports had acquired Dhamra Port Co. Ltd in June last year.
Meanwhile, volumes at the Mundra port continue to grow faster than at major ports for the last fiscal year. Total cargo handled at major ports increased by 5% compared with 10% growth at Mundra. Better infrastructure and location advantage, along with higher efficiency have boosted cargo growth.
The outlook for volume growth appears good in the near term. Analysts expect volume growth to be driven by container traffic, coal and crude oil shipments. While that bodes well, most of the good news may already be factored in.
In the past one year, the Adani Port stock has risen 54% compared with a 17% increase in the BSE 100 index. Repeating that is not going to be an easy task.
