Elara Capital bets on JSW Infra's strategic expansion; upgrades to 'Buy'

Elara Capital has turned bullish on JSW Infrastructure and upgraded the stock to Buy from Accumulate, citing strong long-term growth potential. The brokerage has raised its target price to ₹362 from ₹345, valuing the company at an unchanged 28x FY27E EV/Ebitda for the ports business and 8x for logistics.

 

“We remain confident of the long-term growth potential, which will be back-ended starting from FY28, led by commissioning of new ports and scale-up in the logistics business. Planned growth capex would be supported by a healthy balance sheet including cash, internal accruals and low leverage,” Elara said in its report, adding that timely execution of projects within budget will be a key monitorable.

 

FY28 seen as a major reset

According to Elara, JSW Infrastructure’s port volumes have been volatile in the near term due to slower iron ore exports. However, port Ebitda has remained stable, aided by tariff hikes. Recent additions such as the Kolkata container terminal, the Oman port and the rail rakes business are in line with the planned capex of ₹39000 crore up to FY30, with benefits expected to accrue from FY28.

 

The brokerage expects Ebitda to more than triple from ₹2,300 crore in FY25 to ₹7,200 crore by FY30E. Management is targeting mid-teen rates of return on new projects. Port Ebitda margins could expand from 50 per cent to 59 per cent by FY30E, driven by a portfolio shift towards greenfield private ports, cargo diversification into containers and the commissioning of the Oman port, which has high-margin potential.  ALSO READ | HDFC Sec says 'Buy' again on JK Lakshmi Cement; 5 drivers behind the call 

“Logistics Ebitda margins may rise from 15 per cent to 30 per cent, led by the addition of the rail rakes business and scale-up in Navkar Corporation through planned capacity expansion. We incorporate new projects into our estimates, leading to a 10 per cent increase for FY27 and 5 per cent for FY28. We revise to Buy with a higher target price of ₹362, valuing at 28x FY27E EV/Ebitda for ports and 8x for logistics,” Elara said.

Roadmap clear for 400 MT port capacity by FY30

Elara highlighted that the strategic addition of the 6 million tonne Kolkata container terminal and the 27 million tonne Oman port, along with 185 MT of ongoing expansion at existing and greenfield ports in India, is expected to raise total port capacity from 180 MT in FY25 to 390 MT by FY30. This leaves scope for Phase 3 terminal bidding at Kolkata port, government port privatisation and inorganic growth.

 

While bulk cargo will remain the mainstay, supported by limited competition and captive volumes, gradual diversification into containers is expected to raise container capacity from 2 per cent in FY25 to 12 per cent by FY30, aided by the Kolkata and Murbhe ports. The share of third-party cargo has already increased from 5 per cent in FY19 to 50 per cent. Elara expects this to sustain, with higher captive cargo from JSW Steel’s capacity expansion likely to be offset by third-party cargo from the Oman and Murbhe ports. Port volumes are projected to grow at a CAGR of 16 per cent during FY25 to FY30E.  ALSO READ | Capex revival, policy tailwinds to aid Siemens; Antique sees 20% upside

Rail rakes acquisition seen as EPS-accretive

JSW Infrastructure has signed an agreement to acquire 100 per cent equity in three rail logistics entities from JSW Shipping & Logistics at an enterprise value of about ₹1210 crore, implying 8x FY27E EV/Ebitda. Elara noted that the valuation is lower than the Navkar acquisition multiple of 15x and below peer and industry averages.

 

“With an Ebitda margin of around 40 per cent, contribution is likely from FY27. With pre-approved capex of ₹540 crore to increase rakes from 17 to 45 and eventually to 100, management plans to scale up Ebitda to ₹600 crore by FY30 from ₹50 crore in FY25,” Elara said. The brokerage added that the acquisition offers strategic access to rail rakes, stable cash flows backed by a 10-year agreement with anchor customers, and synergies with the ports business.

 

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