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PNP port acquisition a good fit, value-accretive

JSW Infrastructure (JSWIL) in its filing yesterday announced the acquisition of a majority stake (50% equity plus 1 share) in PNP Port Maritime Service Pvt Lt d (PNPL) from Shapoorji Pallonji Group for a cash consideration of INR 2.7bn (enterprise value of INR 7bn, 16.7xFY23 EV/EBITDA as per our calculations). This is in line with JSWIL’s value-accretive acquisition strategy, as outlined in our coverage note (link). JSWIL has already announced two acquisitions (liquid terminal in Fujairah and CTO licence in Nov’23) since its listing in Oct’23. PNPL operates multi-purpose jetties and has good road and rail connections to industries in Maharashtra, Madhya Pradesh, Karnataka, and other states and can, consequently, help JSWIL expand its third-party volume. PNPL also has adequate land to expand its capacity from 5mntpa currently to 19mntpa. We reflect this acquisition in our estimates (1-2% increase in FY25/26 EPS estimate) and revise our Mar’25TP to INR 255 (earlier INR 250), basis 18x FY26 EV/EBITDA. We maintain BUY.

? Background on PNPL port: PNPL is an operational port situated at Shahabad in Raigad, Maharashtra, with a 30-year concession (expiring in Sep’29) from Maharashtra Maritime Board. It currently has a capacity of 5mntpa and handled bulk cargo of 3.9mnt in FY22 (2.9mnt in 1HFY23). PNPL has a strategic location advantage with direct access to large cargo centres in Maharashtra through the Central and Konkan Railway networks and the Mumbai-Goa highway. This will help in seamless handling of container, liquid, and bulk cargo shipments and enable JSWIL to cater to diverse customer needs.

? A strategic acquisition: This acquisition is in line with JSW Infrastructure's strategic vision to organically or inorganically expand to offer comprehensive logistics services closer to areas where cargo is consumed or generated. PNP port is expected to strengthen JSWIL’s ability to provide Hub & Spoke model services to customers (and also expand the share of third-party customers) and also develop huge synergies with its existing ports and terminals. Further, JSWIL has the option to the modernise the port’s facilities and expand its capacity from 5mntpa currently to 19mnt in phases.

? Value accretive strategy at work: Post listing in Oct’23, JSWIL acquired a) Marine Oil Terminal Corp, which operates a liquid storage terminal with a capacity of 4,65,000 cbm and is situated at Fujairah Oil Industry Zone (FOIZ) in Fujairah, and b) Container Train Operator (CTO)/Concession licence from Sical to ply container trains throughout the Indian Railways network in both export-import and domestic segments.

? Revise Mar’23TP to INR 255 (INR 250 earlier): We believe that this strategic acquisition will grant JSW Infra access to more regions in the hinterland and expand the share of 3rd party cargo. Presently, the PNP port primarily handles coal imports, which are being carried out manually, leading to low margins (~20%). We believe JSWIL will be able to expand PNP’s margins over time by adequately investing in its modernisation. We reflect this acquisition in our estimates and arrive at a revised Mar’25 TP of INR 255 basis, 18x FY26 EV/EBITDA.

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