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APSEZ reported an expectedly weak print in This autumn. Its capex plan goals to offer the trail for APSEZ to (1) attain 500-mn ton port quantity goal by FY2025 from 350-360-mn FY2023 steerage and (2) turn into a transport utility with a robust logistics providing. Up-fronting of capex and fluid market situations would make the trail to 16% RoCE goal for 2025 from present 11% tough, extra back-ended and fewer clear. We retain operational estimates and enhance FV on roll-forward to Rs 735. Cut back stays, with 15X FY2023E EV/Ebitda buying and selling valuations.
Weak finish to the yr on anticipated strains
Adjusted for Sarguja rail acquisition, APSEZ reported a flattish y-o-y Ebitda and a decline of 4/0/2% in port volumes/revenues/Ebitda. This represents a marginal 4% miss versus our Ebitda estimate adjusted for the delay in consolidation of the Gangavaram port asset. The agency has managed to comprise its total internet debt to Ebitda at 3.5X regardless of cheap capex spends and funding in buying Gangavaram and Krishnapatnam.
Steerage cheap on volumes and aggressive by way of timing on capex
Quantity steerage for FY2023 seems cheap to us at 350-360 mn tons versus 312 mn tons in FY2022. The steerage lacks the punch on a low y-o-y base. The steerage on capex suggests a pointy bounce to Rs 86 bn or greater than 2X versus FY2022 ranges. Key movers of the incremental
Rs 50 bn capex are warehousing (Rs 25 bn capex), Gangavaram (Rs 8 bn) and Mundra+Dhamra (Rs 12 bn). From a port perspective, the capex depth is doubling in Mundra and Dhamra. In logistics, the main focus is extra on warehousing – gear capex to construct in land purchased by Adani Ports final yr. The up-fronting of capex and fluid market situations suggest that realisation of the enterprise returns envisaged on the incremental capex might take time. This could influence the realisation of the 16% RoCE goal by FY2025. At present, the APSEZ portfolio operates at 11% RoCE (down 100 bps y-o-y).
We retain estimates and enhance FV
We enhance our FV to Rs 735 (from Rs 710), largely on account of six months of roll-forward and better worth for Gangavaram asset, with half of the rise negated by greater capex assumptions. Retain Cut back given punchy 15X FY2023E EV/Ebitda entry valuations.
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