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Tuesday, April 28, 2009

Mundra Port and Special Economic Zone Ltd:-A great buy

Scripscan:Mundra Port and Special Economic Zone Ltd
Traded in:Nse-bse

BUSINESS: Incorporated in May 1998 MPSEZ (formerly known as Gujarat Adani Port) has the exclusive right to develop and operate Mundra port and related facilities for 30 years. It operates an all-weather port with eight multi-cargo berths, an in-zone airport and four container berths. The port claims to have one of the deepest drafts of 15-17.5 metres on the West coast, which enables even large vessels to berth alongside. The company currently offers port services for bulk cargo, container cargo and crude oil. It also provides related services including freight railway services between Mundra Port and Adipur, the nearest railhead.

GROWTH STRATEGY: The port is well-connected via roads, railways and pipelines. Availability of vast undeveloped waterfront along with free trade and warehouse zone hold significant potential for growth. MPSEZ has entered into long-term contracts with IndianOil and Hindustan Petroleum for importing crude oil. It has also entered into agreement with the developer of the 4,000-mw ultra mega power project at Mundra to provide port and cargo handing services to the project. A similar agreement is in place with Adani Power, which is developing a 2,640-mw thermal power plant in the vicinity of Mundra using imported coal. The other growth driver is the company''s investments in the other projects being developed by the Adani group. It will hold a 74% stake in Adani Petronet (Dahej) Port, a joint venture (JV) with Petronet LNG to develop a solid cargo port terminal at Dahej. It holds a 50% stake each in Inland Conware and Adani Logistics. While the former plans to establish rail-linked inland container depots across India, the latter proposes to start container train operations from Mumbai Port to the National Capital Region (NCR) and other locations.

SEZs: A significant part of the valuation is, however, being driven by the proposed multi-product SEZ at Mundra scheduled to start operations in ''10. MPSEZ has already acquired around 15,000 acres of land for the project and intends to acquire another 15,000 acres. Total investment in creating basic infrastructure at the SEZ site is estimated to be around Rs 700 crore.

VALUATIONS: Though the company does not have listed peers, its valuations look realistic vis-a-vis other infrastructure companies such as GMR Infra and Larsen & Toubro. To justify such high valuations, however, MPSEZ will have to continue to grow at over 50% year-on-year for the next five years. It will also have to deliver its promises on SEZ and investments in various JVs. If you believe in the infrastructure growth story, then the stock is worth investing at present prices or at dips.

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