Analysts see 42% upside in Adani Ports but stock falls post Q4 results

CLSA has maintained its ‘buy’ rating on the Adani Group company and hiked its target price to Rs 878 from 792. Meanwhile, Nomura has also retained its ‘buy’ call on the stock with a target price of Rs 1,025.

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Shares of Adani Ports and Special Economic Zone (ASPEZ) dropped 2 percent on May 31 despite an upbeat commentary from the analysts and company.

CLSA has maintained its ‘buy’ rating on the Adani Group company and hiked its target price to Rs 878 from 792. The brokerage firm pointed out that APSEZ is getting ready for its next leg of growth.

Meanwhile, Nomura has also retained its ‘buy’ call on the stock with a target price of Rs 1,025. It said the company’s Q4 results are operationally better than estimates and highlighted that the management underlined its focus on deleveraging and minimum share pledges by FY24.

The financials

At 09:29 am, the Adani Group company’s stock was quoting at Rs 724.45, down 1.34 percent. The scrip was among the top losers on Nifty 50.

Revenue jumped 40 percent YoY to Rs 5,797 crore even as net profit rose merely 5 percent to Rs 1,159 crore during the quarter ended March. Profit after tax was lower than estimates due to an exceptional expense of Rs 1,273 crore, led by a non-cash impairment generated by the sale of Myanmar port asset, ICICI Securities pointed out.

EBITDA margin expanded to 56.4 percent from 49.7 percent posted a year ago.

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ASPEZ completed six acquisitions during the year: Haifa Port Company, Gangavaram Port, Karaikal Port, IOTL, Ocean Sparkle, and ICD Tumb. The total investment for these acquisitions was approximately Rs 18,000 crore. Additionally, ASPEZ had a total capital expenditure (capex) of around Rs 9,000 crore during the year.

Even though APSEZ made a record annual investment of approximately Rs 27,000 crore (the highest ever in the company’s history), they have been able to keep the net debt to EBITDA ratio at 3.1 times. This is within the guided range of 3-3.5 times.

Guidance for FY24

Cargo volumes are projected to reach between 370-390 million metric tonnes (MMT), which will generate a revenue of approximately Rs 24,000-25,000 crore. The estimated EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to be in the range of Rs 14,500-15,000 crore.

Furthermore, the total capital expenditure (capex) for the year is expected to be around Rs 4,000-4,500 crore.