India Ports:Low base should lift growth in the near term

Growth in Indian major ports throughput slowed to 4.9% y-o-y in May from 6.3%in April as momentum stalled across all cargoes. Container throughput (TEU) growthslowed to 6.6% in May after strong growth of 9.8% in April. Meanwhile, coal throughputdeclined at a slightly faster rate of 5.0% in May vs a 3.5% decline in April. The latterwas mainly due to a continued fall in thermal coal throughput (-11.9% in both May andApril) and slower growth in coking coal throughput (10.5% in May vs 15.0% in April).

    POL, on the other hand, remained stable, growing by 6.4% in May vs 6.5% in April.

    Throughput growth should hold up well in the near term. The latest Indiamanufacturing PMI came down to a three-month low of 51.6 in May from 52.5 inApril, albeit remaining in expansionary territory. Also, after three consecutive monthsof growth, new export orders reversed to a slight contraction. Meanwhile, y-o-ygrowth in Indian exports (USD) moderated to 18% in April after strong expansion inFebruary (23%) and March (27%). Despite weakening industrial activity and tradegrowth, we continue to expect port throughput growth to hold up well at least untilAugust driven by a favourable base effect and better world demand growth.

    We continue to prefer ADSEZ over GPPV as a play on India’s structural growth.

    ADSEZ reported a strong FY17 results. In FY17, total throughput was up 11% y-o-ywhile container throughput grew 27% compared to overall India container growth of10%. Management remained upbeat, guiding for 12-14% throughput growth in FY18e(see Adani Ports and SEZ