Adani Ports gains as brokerages raise target on strong Q1 show

Adani Ports’ domestic cargo volumes recorded an 8 percent YoY increase, which is three times India’s volume growth rate in the same period

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Adani Ports and Special Economic Zone opened higher on August 9 as brokerages reposed faith in the stock, with some even raising target prices, a day after the company’s strong show in the first quarter of the current financial year.

The company reported an 82.57 percent year-on-year rise in consolidated net profit at Rs 2,114.72 crore in the quarter under review. Revenue from operations climbed 23.51 percent to Rs 6,247.55 crore from Rs 5,058.09 crore in the year-ago period.

The ports major also saw a 200 basis points jump in domestic market share, despite over 50 percent of the company’s total port capacity being adversely impacted for six days due to Cyclone Biparjoy.

One basis point is one-hundredth of a percentage point.

At 9.16 am, the stock was quoting at Rs 790.75 on the National Stock Exchange, up 0.84 percent from the previous close.

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Brokerage views

On the back of the earnings report, brokerages say Adani Ports continues to be a “prized asset”.

Bernstein maintained the “outperform” rating on the stock and a target of Rs 888 a share, as it cited the company’s impressive volumes and EBITDA growth.

It also commended the management’s commitment to strengthening the balance sheet.

APSEZ’s domestic cargo volumes recorded an 8 percent year-on-year (YoY) increase, three times India’s cargo volume growth rate in the same period.

In FY24, Adani Ports expects cargo volumes at 370-390 MMT, resulting in a revenue of Rs 24,000-25,000 crore and EBITDA of Rs 14,500-15,000 crore. Total capex during the year is expected to be Rs 4,000-4,500 crore.

Also Read: Adani Ports Q1 net profit zooms 83% on the back of fresh acquisitions

CLSA, too, is bullish on Adani Ports and has a “buy” call with a target price of Rs 878. The firm’s focus on optimising the cargo mix, tariff adjustments, and favourable currency exchange rates propelled its port margin higher, it said.

The company’s domestic ports business posted an EBITDA margin of 72 percent and logistics business 28 percent.

Goldman Sachs has raised its target on Adani Ports to Rs 820. The company’s diversified revenue streams, including contributions from the Haifa Port acquisition, played a pivotal role in boosting revenue and profitability, it said.

Jefferies, too, increased its target price to Rs 890 a share with a “buy” rating. It expects even better margins as the efficiency of acquired ports picks up. The broking firm has adjusted its EBITDA estimates for FY24 and FY25, projecting growth of 3-5 percent.

Citi has one of the most bullish targets on the Street at Rs 972, indicating a 23 percent upside from current levels. Given the strong Q1 performance, it thinks there is some upside risk to FY24 volume guidance.

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