Tughlakabad (TKD) seeing limited volume loss, despite the 10-12% realisation hike effective 6 Dec 2020. Our interactions with competitors suggest 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 lower LLF are additional upside. Buy.
TKD hike implies additional Rs 1.4-1.6 bn revenue: Container Corp (Concor) levied a land usage surcharge of Rs 5,000/TEU on loaded import containers. TKD handles approx. 0.4-0.45 mn TEUs with likely 70:30 import-export mix. Rs 1,974/TEU is the LLF rise impact 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 hikes. TKD pricing power has given us confidence to improve FY25E EBITDA/TEU to Rs 4,151, slightly higher than normalised FY20 levels at 2.1x volumes. We believe our LLF assumptions do leave room for upside if management gives up terminals and retains TKD only (Rs 7-8 bn LLF) as the EBITDA earned at other terminals is Rs 2.5 bn at best.
However, we are awaiting clarity on this with 4Q results. DFC interaction boosts confidence in our volume growth assumptions. Dedicated Freight Corridor (DFC) Director, in a recent investor call organised by us, was extremely positive on rail gaining share from roads. Palanpur-Khatuwas (641 km) was highlighted as a section where volumes could rise 3x given transit time and cost saving. Enquiries have already 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.
JNPT land issues have been resolved with possession expected in a month. Ministry target for JNPT remains June 2022 vs our expectation of April 2023. Our 22% volume CAGR assumption for Concor in FY21E-25E implies traffic rising 2.2x, which could see a positive surprise based on the call commentary.