Adani Ports sees volumes recovery in Q2, gears up for Concor acquisition

ADSEZ's operating performance in 2QFY22 led the EBITDA (ex-forex) to grow 19% YoY to Rs. 22.1bn. Port EBITDA grew +22% YoY with Port margins at 70% vs 70.7% YoY and 70.6% QoQ. Port EBITDA/T stood at Rs. 308 vs. Rs. 306 YoY and INR311 QoQ. In 2QFY22, topline grew ~22% YoY to Rs. 35.3bn, while Logistics revenue grew 21% YoY and margins increased to 26.3% vs. 23.1% QoQ and 22.5% YoY. SEZ revenue stood at Rs. 250mn vs Rs. 7.4bn QoQ and Rs. 210mn YoY, while port revenues grew by 24% YoY. Cargo volumes grew 21% YoY to 68.3mnT along with an increase of 23% YoY growth in Container, and 26% YoY growth in Coal. Volumes slipped 10% led by 28% QoQ drop in Coal volumes on account of higher coal prices. Net Debt stood at Rs. 31.3bn as of 1HFY22 vs. Rs. 28.5bn as of FY21 end.

Volumes at Mundra were flat YoY, Dahej grew at +30% YoY, Hazira at 17%, Dharma at 2% YoY, Kattupalli at -33% YoY. Reported PAT stood at Rs. 9.5bn down by 31% YoY as the company had to book an exceptional loss of Rs.4bn relating to non-receipt of SEIS income from government, post change in regulation. Overall for FY22, the volume guidance was maintained at 350-360mnT.
ADSEZ, overall, has targeted to reach 500 MMTPA in next 4years, and these will continue to grow to 200 from 60-70 currently and build a rail track of 2000km. The company has a targeted expansion to 300-350 MMTPA of capacity over the course of concession of 50 years at Dighi Port. 

The company’s annual capex target of Rs. 31-35bn comes on account of various ports, including capex in Sri Lanka terminal, Vijinjam, and logistics parks but doesn't include the impact acquisition in readymade warehousing segment. Company incurred capex of Rs. 19bn in 1HFY22 vs. Rs. 9bn YoY

Rail modal share at Mundra now stands at 35% vs. 31% and this is targeted to reach 38-39% by FY22 end. For its investment plan in Sri Lanka, the company plans to develop a total berth length of 1400mt i.e. 3.8mn Teus capacity terminal. The construction for the same starts in December 2021, and plans to complete Phase 1 construction in 24 months and the cost of Phase 1 & 2 is estimated at US $650mn. The management announced an appointed date of 1 April 2021 for the merger of Gangavaram Port and is expecting NCLT approval for its acquisition before the end of FY22. 
The company is gearing up for Concor acquisition and has been accumulating cash for the same. There has been a build-up of debt, however, net debt may remain at current levels of Rs. 31bn as management expects to fund the acquisition from next year FCF of Rs. 80bn as the acquisition process to start from April-22.