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Revenue in line with a slight miss on earnings; outlook remains bright

* JSW Infrastructure (JSWINFRA) posted 15% YoY revenue growth to INR10.1b (in line) in 1QFY25. Cargo volumes rose 9% YoY to 27.8MMT, of which thirdparty cargo grew 48% YoY to 13.8MMT (50% of the total cargo in 1QFY25 was from third parties). The volume growth was primarily led by incremental volumes from the acquired assets and improved capacity utilization at the Paradip iron ore and coal terminal.

* EBITDA margin dipped ~40bp YoY/~200bp QoQ to 51.0% (vs. our estimate of 53.8%). EBITDA grew ~14% YoY to INR5.1b (8% below estimate). EBITDA growth was hit by higher operating expenses. APAT rose 17% YoY to INR3.0b (our estimate of INR3.3b). Cash & Bank balance was INR45.7b at end-1Q.

* Volumes in 1QFY25 (from Dharamtar/Jaigarh ports) were hit by the maintenance-related shutdown at JSWINFRA’s Dolvi facility. From 2Q, these ports would clock normalized volumes as the shutdown is now behind. Hence, the overall volume growth guidance for FY25 is unchanged. Margins would improve as these ports generate higher margins than most other ports.

* JSWINFRA has a robust pipeline for constructing new ports and terminals, with a focus on delivering comprehensive logistics services. The acquisition of Navkar Corporation marks the initial step towards offering pan-India logistics services, including last-mile solutions. JSWINFRA is pursuing organic and inorganic growth opportunities, thereby bolstering its market footprint.

* We marginally cut our APAT estimates by 4%/2% for FY25/FY26. We estimate a volume/revenue/EBITDA/APAT CAGR of 15%/22%/26%/28% over FY24-26.

Reiterate BUY with a revised TP of INR390 (based on 25x FY26E EV/EBITDA).

Cargo volumes up 9% YoY driven by higher utilization at the newly acquired ports; the Dolvi plant shutdown hit volumes temporarily

* During 1QFY25, JSWINFRA managed cargo volumes of 27.8MMT (+9.4% YoY). This growth was primarily driven by increased utilization at the Paradip coal terminal and contributions from newly acquired assets (PNP and the UAE liquid terminals). The volumes could have been better but were hit by a temporary decline at Dharamtar and Jaigarh cargo volumes due to the planned shutdown at the Dolvi steelmaking facility.

* Third-party volumes grew 48% YoY to 13.8MMT, representing 50% of total volumes handled in 1QFY25 (vs. 37% in 1QFY24).

Building a pan-India logistics network with focus on last-mile connectivity

* JSWINFRA, through its wholly owned subsidiary, JSW Port Logistics Pvt. Ltd., acquired a 70.37% stake in Navkar Corporation Ltd. The objective of the acquisition was to provide diverse logistic solutions for last-mile connectivity along with access to large land resources.

* JSWINFRA also received an LoA from Southern Railways, Chennai Division, for the construction and operation of Gati-Shakti Multi-Modal Cargo Terminal (GCT) at Arakkonam, Chennai. This would help establish a panIndia logistics network, enhancing last-mile connectivity.

Highlights from the management commentary

* The Dolvi plant shutdown hit volumes at two major ports, Jaigarh and Dharamtar. The situation has normalized now. Volumes would stabilize, and margins would improve from 2QFY25 onwards.

* Management is targeting a cargo growth of 10-12% in FY25.

* JSWINFRA has signed a concession agreement with V.O. Chidambaranar Port, Tamil Nadu, to develop a new 7 MPTA cargo berth. This is in line with its longterm expansion strategy to have 400MMT cargo handling capacity by 2030.

* Further, JSWINFRA is expanding its pan-India logistics footprint by acquiring 70.37% of Navkar. It has also received an LoA for the Gati-Shakti Multi-Modal Cargo Terminal at Arakkonam, Chennai.

* An increase in the effective tax rate is expected to continue for some time as 80 IA benefits are expiring at certain ports. The company is using MAT credit, and the tax rate will stabilize once it migrates to the normal tax regime.

Valuation and view

* Leveraging its strong balance sheet, JSWINFRA aims to pursue organic and inorganic growth opportunities, strengthen its market presence, and expand its capacity to 400MMT by 2030, up from the current capacity of 170MMT

* As utilization and volumes continue to ramp up, we expect strong growth to continue. We marginally cut our APAT estimates by 4%/2% for FY25/FY26. We estimate a volume/revenue/EBITDA/APAT CAGR of 15%/22%/26%/28% over FY24- 26. Reiterate BUY with a revised TP of INR390 (premised on 25x FY26E EV/EBITDA).

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