Adani Enterprises' Q4FY19 results (Underperformer) - Coal MDO volume grew by 88% yoy
Q4FY19 result highlights
- Adani Enterprises’ (ADE) reported revenues of Rs133bn (est of Rs99bn) in Q4FY19, +29.3% yoy led by sharp jump in coal trading volumes (+54% yoy) and MDO volumes (+88% yoy) to 3.7mt.. FY19 trading volumes was 67.5mt (+2% up yoy) and MDO volume was 12.1mt (+73% up yoy)
- EBITDA grew by 8% yoy to Rs7.1bn led by 152% jump in MDO EBITDA to Rs3.6bn offset by decline in Coal trading EBITDA by 49% yoy to Rs2.4bn. FY19 EBITDA was Rs19.7bn (- 25% yoy) led by decline in coal trading EBITDA by 30% yoy to Rs8.4bn offset by MDO EBITDA growth of 111% yoy to Rs10bn and demerger of Adani gas.
- Other income declined by 31% yoy to Rs2.3bn in Q4FY19 as Q4FY18 other income was boosted by delayed payment surcharges. Adani Wilmar JV reported EBITDA growth of 126% to Rs3.5bn for Q4FY19 (FY19 EBITDA – Rs12.1bn). As a result, adjusted PAT grew by 7% to Rs4.4bn (est: Rs2.3bn) in Q4FY19
- Reported PAT was Rs2.8bn due to write offs in Australian Coal mines (Rs6.6bn) offset by gain in divestment of agri logistics and thermal business (Rs4bn)
- New businesses: Airports - AEL has won the bids that were invited by the Airports Authority of India for the management of 6 airports at Ahmedabad, Jaipur. Lucknow, Thiruvananthapuram, Mangaluru and Guwahati. Highways - It also won two hybrid annuity road projects with a cost of Rs30bn in state of Telanagana
Key positives: Strong MDO volumes in Q4FY19 and F19; key win in new businesses at airports and highways
Key negatives: Drop in coal trading margin
Impact on financials: Maintain our FY20E earnings estimates and introduced FY21E earnings estimates of Rs11bn.
Valuations & view
ADE offers a unique combination of coal mining and coal logistics businesses. The domestic coal MDO business offers good growth potential with a large number of captive coal mines having been auctioned / allocated. AEL has won a number of bids in long gestation roads and airports business. However, in our opinion, it is too early to assign values to road and airport business. As a result, the stock offers limited upside to our revised SOTP based PT of Rs140. As a result, we maintain our Underperformer on the stock.
Adani Enterprises is a global integrated infrastructure player with businesses spanning coal trading, coal mining, oil & gas exploration, ports, multi-modal logistics, power generation & transmission, gas distribution and edible oil & agro commodities. Co.'s business has three components: resources, logistics and energy. Resources means obtaining coal from mines and trading; in future it will also include oil and gas production. Logistics denotes a network of ports, SEZ and multi-modal logistics - railways and ships. Energy involves power generation & transmission and gas distribution.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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