Recommendation from Infrastructure Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

JSW INFRASTRUCTURE: MORE PORTS, MORE PROFIT

HERE IS WHY
✓ Second-largest commercial port operator in India
✓ Capacity expansions on the anvil
✓ India’s port sector to post exponential growth

I ndia is strategically located on the world’s shipping routes with a coastline of approximately 7,517 km. An approximate 95 per cent of India’s export of merchandise trade by volume and 70 per cent by value are done through maritime transportation. In line with Maritime Amrit Kaal Vision 2047, India is aspiring to quadruple port capacity to 10,000 million tonnes by 2047 from 2,600 million tonnes at present.

Considering the importance of marine port and services companies, our recommendation of choice scrip for this issue is JSW Infrastructure. The company provides maritime-related services, including cargo handling, storage solutions and logistics services. JSW Infrastructure is a part of the JSW Group and is the second-largest commercial port operator in India in terms of cargo handling capacity. The company currently handles cargo, including dry bulk, break bulk, liquid bulk, gases and containers.

It operates 10 ports in India with an aggregate installed cargo handling capacity of 170 MTPA (million tonnes per annum) as of FY24. This is spread across western and eastern Indian coasts. The company also operates two port terminals under operation and maintenance agreements for cargo handling capability of 41 MTPA in the UAE and a liquid storage terminal at Fujairah with capacity of 5 MTPA. In Q2FY25, on a consolidated basis, its revenue increased by 18.04 per cent YoY to ₹1,001.36 crore compared to ₹848.31 crore from the previous year’s same quarter.

The company’s PBIDT excluding other income increased by 47.95 per cent to ₹675.65 crore in the same period and its profit after tax (PAT) stood at ₹373.73crore for Q2FY25 compared to ₹255.87 crore, indicating a YoY increase of 46.06 per cent. The total cargo handled by JSW Infrastructure in Q2FY25 was 27.5 million tonnes, reflecting a 16 per cent growth YoY while its third party cargo grew by 48 per cent YoY to 12.7 million tonnes, increasing its share to 46 per cent of the total mix. The board of directors has approved ₹2,359 crore for 36 million tonnes per annum brownfield capacity expansions at Jaigarh Port and Dharamtar Port. The expansion is expected to generate an additional cargo handling volume of approximately 27 million tonnes per annum, with completion anticipated by March 2027.

The company is exploring opportunities for additional cargo terminal bidding, focusing on enhancing cargo profile and operational reach. Its management has said that the company is all set to capitalise on the projected growth in cargo volumes and increased traffic in India’s port sector. They have a clear vision of transforming JSW Infrastructure into a complete logistic solutions provider delivering costeffective, last-mile connectivity. The aim is to not only increase its capacities but also create a stronger footprint in the international port and marine sector.

To leverage the port sector’s growth potential, its robust growth plan is targeting to enhance cargo handling capacity by 2.4 times from 170 MTPA to 400 MTPA by FY 2030 or even earlier. In the last three years the company has delivered average ROE of 17.4 per cent and ROCE of 14.7 per cent. Taking into account the importance of ports for the growth of India’s economy and the company’s potential to manage larger capacities, we recommend BUY.