Fundamental Analysis Of JSW Infrastructure: With India’s remarkable economic growth trajectory, driven by the government’s proactive policies such as Aatmanirbhar Bharat and flourishing trade, the demand for efficient logistics and port operations has escalated significantly. 

This rapid development will require India’s coastline to possess the most technologically advanced ports that can make the logistics of goods as smooth as possible.

Today let us look at one such port operator, part of a bigger parent group who operates ports across multiple states of the country. Let us learn more about business and the financial aspects surrounding it.

Fundamental Analysis Of JSW Infrastructure

Company Overview

JSW Infrastructure is the 2nd largest commercial port operator in India and also the fastest-growing port-related infrastructure Company in India. The Company was established in 2002 as it received a port concession from a port in Mormugao, Goa.

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Since then, it has expanded to 9 port concessions becoming a diversified ports Company. A port concession is a long-term agreement of approximately 30 – 50 years, in which Companies develop, operate, and manage the port as per the concession agreement.

In return for developing & managing the port, Companies like JSW use the port for providing maritime-related services such as cargo handling, storage solutions, logistics services, and other value-added services. 

The Company has an installed cargo handling capacity of 158.43 MTPA as of June 30, 2023. It is up 15% from 119.23 MTPA in FY21. The cargo volume of JSW’s ports stood at 92.83 Million metric tons as of FY23.

JSW’s ports are spread across the coastline of India to serve the industrial hinterlands of Maharashtra, Goa, Karnataka, Tamil Nadu, Andhra Pradesh, Chhattisgarh, Jharkhand, and Odisha. In addition to Indian operations, the Company also operates 2 ports under Operations & Maintenance agreements for a cargo handling capacity of 41 MTPA in the UAE as of June 30, 2023.

Industry Overview

India is one of the fastest-growing economies in the world with an estimated growth averaging around 6.6% from FY24 – FY26. The country’s strong growth is driven by the government’s capital expenditure push, progressive policies such as Production Linked Incentives (PLIs), and healthier corporate balance sheets. 

From FY13 till FY22 exports have grown at a CAGR of 7.6% while imports have grown at the rate of 6.2%. FY23 saw a 16% growth in exports and imports by 24%, the highest growth so far. The total value of exports & imports stood at Rs. 36 Lakh Cr and 57 Lakh Cr respectively for FY23.

As of FY21, India’s logistics cost is 14% of GDP as per Niti Aayod, compared to 10-11% for other BRICS countries and 8-9% for developed countries. Moving forward, this cost is expected to decline driven by initiatives such as the investments in road infrastructure and development of inland waterways.

Other important developments include the development of dedicated freight corridors. The “Sagarmala” (port-led prosperity) is another initiative that was rolled out in April 2016 by the Central Government to optimize infrastructure investment to reduce logistics costs for both domestic and export-import cargo.

The Sagarmala program aims at enhancing India’s port capacity to over 3,300 MTPA by 2025. According to the Ministry of Shipping, this would include 2,219 MTPA of capacity at Major Ports and 1,132 MTPA at Non-Major Ports by 2024 – 2025. 

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Fundamental Analysis Of JSW Infrastructure – Financials

NOTE: JSW issued its shares to the public in September of 2023. Due to this, we have access to just three years of financial data on the Company since FY21.

Revenue & Net Profit

JSW’s Infrastructure growth has been quite stellar and consistent in the past three years, with the Company growing by 41% from Rs. 2273 Cr in FY22 to Rs. 3195 Cr in FY23. The revenue growth comes as a result of the expansion of the port’s handling capacities and an increase in cargo volumes due to increased demand. 

While revenue scaled in the 40% range, earnings performance was even stronger with a growth of 127% from 330 Cr in FY22 to Rs. 750 Cr in FY23. Since FY21, JSW’s Net Profits have scaled by 27%.  

Fiscal YearGross RevenueNet Profit
2023 ₹ 3,194.74 ₹ 749.51
2022 ₹ 2,273.06 ₹ 330.44
2021 ₹ 1,603.57 ₹ 284.62
2-Year CAGR41.15%62.28%

Profit Margins

EBITDA margins of the Company were at 53.3% as of FY23, and have improved from 51% in FY22. The improvement in margins was a result of a drop in other expenses as a percentage of revenue. JSW ports can maintain strong margins in the 50%+ category due to operating expenses being no less than 38% of revenue.

The Company reported Net Profit Margins of 22% in FY23, which increased significantly from 13.9% in FY22. Profit Margins are weighed down by debt as the Company pays out 19% of its revenue as interest expense. Finance costs have been increasing at a CAGR of 27% as the Company increased its long-term debt in FY22.

Fiscal YearEBITDA Margin (%)Net Profit Margin (%)
202353.32%22.22%
202251.08%13.89%
202153.10%16.96%
3 Year Average52.50%17.69%

Return Ratios

Return on Equity of the Company increased from just 9.52% in FY22 to 18.33% in FY23. This was a result of the higher Net Profits than the previous year. From the next year, Return on Equity would subside or drop a bit, as Equity share capital will increase due to the Initial Public Offering.

Return on Capital Employed remains at the high figure of 20%, which is commendable for a Company of this size carrying lots of debt. As the Company has not raised any debt since FY22 and managed to double its earnings, we see that the return on Capital Employed has increased from 10.88% in FY22 to 19.5% in FY23.

Fiscal YearROE (%)ROCE (%)
202318.33%19.49%
20229.52%10.88%
20219.22%8.15%
3 Year Average12.36%12.84%

Debt Analysis

The Company’s debt-to-equity ratio increased from 1.3x in FY21 to a high of 1.41x in FY22 and has stabilized at 1.28x as of FY23. This was a result of Long-Term Borrowings increasing by 21% from FY21-22. However, in FY23 debt to Equity ratio has dropped despite the debt burden being unchanged. This was because of an increase in Equity which was due to higher profits being retained in the business. 

The interest coverage ratio stands at a rather safe value of 2.36x. Although the Company carries high debt, it has enough earnings to cover its interest costs. An interest coverage ratio greater than 1.5x is a safe measure of interest coverage ratio. We have understood about the financials of Fundamental Analysis Of JSW Infrastructure.

Fiscal YearDebt / EquityInterest Coverage
20231.282.36
20221.412.02
20211.302.72
3 Year Average1.332.37

Fundamental Analysis Of JSW Infrastructure – Key Metrics

The Key Metrics of JSW Infrastructure are given below.

ParticularsAmountParticularsAmount
CMP ₹ 250.00 Market Cap (Cr.) ₹ 47,092.00
EPS ₹ 4.12 Stock P/E (TTM)63.53
ROE (%)18.33%ROCE (%)19.49%
Promoter Holding85.61%FII Holding4%
Debt to Equity1.28Price to Book Value6.92
EBITDA Margin53.32%Net Profit Margin22.22%

Fundamental Analysis Of JSW Infrastructure – Future Plans

  1. Expand its presence in the non-major ports of India via greenfield or brownfield expansion to broaden the Company’s optimal cargo mix of bulk, container, liquid, and gases across all ports.
  2. The Company will look towards acquiring more ports across the coastline of the country. 
  3. JSW infrastructure will look to pursue synergistic businesses such as the development of liquid storage terminals, container freight stations, multi-modal logistics parks, and inland container depots.
  4. Most of the JSW’s ports are accessed by the JSW group itself which contributes to 67% of revenue. JSW infra will look towards diversifying its business to attract more business from non-group Companies.
  5. The Company will take greater initiatives towards building sustainable ports that can contain the pollution caused by importing metals and minerals like coal & steel.

These were some future plans of JSW Infrastructure listed under the Fundamental Analysis Of JSW Infrastructure.

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Conclusion

In this article on Fundamental Analysis Of JSW Infrastructure, JSW Infrastructure is an admirable diversification for the JSW Group as it allows for vertical integration when it comes to importing & exporting raw materials and finished goods in & out of the country.

These ports are strategically located on the coastline of places where JSW has its factories. Being a port operator benefits these Companies by reducing their logistics costs while JSW Infrastructure can have a stable cash flow from its sister companies.

This is the major advantage of JSW Infrastructure. Apart from this, the Company has been consistently scaling revenues and significantly improving margins. Debt remains a heavy burden, however, if the earnings continue to increase then its debt to Equity should fall below 1x.

Nevertheless, with everything going good for the company it currently trades at a sky-high premium of 64x. So, is JSW Infrastructure a good buy at this price point? Let us know in the comments below.

Written by Nasir Hussain 

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