We had been positively shocked at Tughlakabad (TKD) seeing restricted volume loss, regardless of the 10-12% realisation hike helpful 6 Dec 2020. Our interactions with competitors recommend no material volume inflow from TKD, in-line with management’s 3Q commentary. TKD hike implies 5% YoY realisation rise in FY22E vs our earlier 3% expectation. We raise our FY22E-25E realisation CAGR to 4% vs 2% and EPS by 18-19%. Privatisation and reduce LLF are added upside. Buy.
TKD hike implies added Rs 1.4-1.6 bn income: Container Corp (Concor) levied a land usage surcharge of Rs 5,000/TEU on loaded import containers. TKD handles approx. .4-.45 mn TEUs with most likely 70:30 import-export mix. Rs 1,974/TEU is the LLF rise influence to Rs 11 bn on FY20 EBITDA/TEU of Rs 3,946 (normalised for Rs 2 bn LLF). We assumed gradual EBITDA/TEU normalisation from Rs 2,043/TEU in FY21 to Rs 3,598/TEU in FY25E with more subdued price tag hikes. TKD pricing energy has provided us self-assurance to enhance FY25E EBITDA/TEU to Rs 4,151, slightly greater than normalised FY20 levels at 2.1x volumes. We think our LLF assumptions do leave space for upside if management provides up terminals and retains TKD only (Rs 7-8 bn LLF) as the EBITDA earned at other terminals is Rs 2.5 bn at ideal.
However, we are awaiting clarity on this with 4Q outcomes. DFC interaction boosts self-assurance in our volume development assumptions. Dedicated Freight Corridor director, in a current investor get in touch with organised by us, was exceptionally positive on rail gaining share from roads. Palanpur-Khatuwas (641 km) was highlighted as a section exactly where volumes could rise 3x provided transit time and expense saving. Enquiries have currently begun for rail slot bookings, with Concor and other rail operators commencing trial runs on some stretches. Gujarat ports are on target to be connected in 1QFY22E.