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Strong volume performance

JSW Infrastructure (JSWIL) posted a strong performance in 3QFY24 with volume growing by 17% YoY/19% QoQ (12% above JMFe) to 28.1mnt and EBITDA/Adj PAT rising 27%/37% YoY respectively. Volume growth was led by Paradip iron ore (+86% YoY) and Paradip coal terminals (+28% YoY). EBITDA grew by 27% YoY/+6% QoQ to INR 4.8bn and was 2% below JMFe. Reported PAT was INR 2.51bn, +118% YoY. Adj PAT was INR 3.13bn, +37% YoY/+25%QoQ and 10% above JMFe. JSWIL completed acquisitions of PNP Port and Fujirah Port in 3QFY24 and also signed the concession agreement for Keni Port (Karnataka). It has received EC of additional 1.6mnt at Ennore Coal Terminal and is hopeful of completing the concession agreement at Jatadhar in 4QFY24. We broadly maintain our estimates and Mar’25TP of INR255. BUY.

3QFY24 summary: Consolidated revenue grew by 18% YoY to INR 9.4bn (+11% QoQ, 4% above JMFe) on the back of strong volume growth of 17%YoY (+19% QoQ, 12% above JMFe) and 1% increase in blended realisation. Volume grew by 86% YoY (34% QoQ; 14% of total cargo) at Paradip iron ore port and by 28% YoY (14% QoQ; 15% of total cargo) at Paradip coal terminal. Volume at key port Jaighar grew by 17%YoY while it declined by 7% YoY at Dharmtar. Owing to the benefit of operating leverage and cost control measures, EBITDA margin improved by 390bps YoY but contracted 230bps QoQ on commodity mix (higher share of coal cargo). EBITDA grew by 27% YoY to INR 4.8bn (+6%QoQ). Reported PAT was INR 2.51bn, +118% YoY. Adjusted for forex gains/losses, PAT was INR 3.13bn, +37% YoY/+10% QoQ and 10% above JMF.

JSWIL continues to benefit from coastal cargo growth momentum: Coastal movement of Indian coal from eastern coast to southern and western coasts has risen over the past 2 years. JSWIL’s Paradip coal terminal, the single largest and one of the most modern coal terminals in India (30mnt capacity), is preferred choice for customers as it is the closest one to the MCL mines. The company started operations 3 years ago and achieved utilisation of 60% in 9MFY24 and expects that to ramp up to 75-80% in 2 years.

Raising share of third party cargo: The share of third party improved to 39% in 3QFY24 as compared to to 31%/36% in 3QFY23/2QFY24 respectively. The mix between group and third party cargo improved to 37:63 during 9MFY24 vs 32:68 during 9MFY24. In order to further increase the share of third party cargo, the company strategically made two acquisitions during the quarter: a) Oil terminal at Fujairah Oil Industry Zone (FOIZ) in Fujairah, having a capacity of 5 mnt, and b) Majority stake in PNPL port with a capacity of 5mnt (which can be extended to 19mnt). The company maintains its long-term vision of 50:50 ratio for third party; group cargo, though it may be 40:60 in the medium term.

Updates on growth plans: Karnataka Maritime Board has awarded Letter of Award (LoI) to JSWIL for greenfield port in Keni (35mnt; capex of INR 41.2bn) while it awaits execution of concession agreement for Jatadhar port (Odisha; 30mnt capacity). Fujairah and PNP Port, JSWIL’s acquisitions in 3QFY24, will start contributing to consolidated financials from 4QFY24. JSWIL has placed bids at 2-3 privatisation opportisation opportunities and is awaiting the outcome of those bids.

Maintain estimates and BUY recommendation: We broadly retain our FY24-26 estimates and maintain BUY with Mar’25TP of INR255. We expect the current valuation multiple of JSWIL to sustain given a) JSWIL’s robust growth, b) new port developments/acquisitions in the medium term, and c) possibility of upward revision in tariff at its major port terminal (new policy allows such revisions, subject to regulatory approvals). Key risks to call - a) Any material downward price revision for group customers, and b) sharp depreciation of INR against USD.

Key takeaways from 3QFY24 results and conference call:

The Karnataka Maritime Board has issued a letter of award for Keni port. The company has also signed a concession agreement for a lease period of 30 years, which can be further extended by 30 years. The estimated cost of establishment of Keni port project is INR 41.2bn, which will be spent over 3-4 years. The port will have an initial capacity of 30mnt. It will have wharfage charge of INR 17/tn.

The company has received environment clearance for an additional 1.6mnt at Ennore Coal Terminal, taking the total terminal capacity to 9.6mnt. The terminal had cargo volume of 6.7mnt/8.7mnt in 9MFY24/FY23 respectively.

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SEBI Registration Number is INM000010361lol