Global brokerage firm CLSA has maintained a buy call on Adani Ports stock with a target price of ₹878, implying an 8 per cent upside potential in the stock from its September 7 closing of ₹809.60 on BSE. The brokerage firm said Adani Ports looks to be on track for a strong Q2FY24 despite slowing global trade, with Aug-23 traffic up 17 per cent year-on-year (YoY) (up 13 per cent YoY ex-Haifa mergers and acquisitions).
CLSA highlighted that port traffic was led by containers and gasification of cargo mix of traffic, while coal imports picked up following a demand spike, improved viability and a government decree.
“Its flagship, Mundra Port, saw a resurgence with all-time high traffic in Aug-23, led by container and coal traffic on a power demand spike met by improved viability of imported coal. The key bright spot was also logistics, with higher bulk volume (up 42 per cent YoY) and rail container traffic up 24 per cent YoY. Overall, we believe this strategic asset remains on track to gain share and grow ahead of the market, which deserves re-rating,” said CLSA.
CLSA expects volume to grow 50 per cent in FY23-26, led by the new terminal at Mundra, the start of Vizhinjam, mergers and acquisitions (Krishnapatnam and GPL), and Dhamra and Kattupalli.
“Adani Ports has maintained its guidance for double-digit growth in its port traffic, revenue and EBITDA ( ₹14,500-15,000 crore versus our estimate of ₹14,000 crore) in FY24 despite an uncertain macro climate. We view Adani Ports as a strategic asset with long-duration port concessions, trading at a 43 per cent discount on FY25CL PE (price-to-earnings ratio) to Container Corp. Adani Ports looks cheap versus Concor on PE and EV/Ebitda,” CLSA observed.
Adani Ports stock is below its long-term average PE of 18.8 times. Besides, it is currently trading at nearly 3 times PB (price to book value), which is below its long-term average PB of 3.1 times, showing a recovery after a steep fall, CLSA pointed out.
However, trade weakness, the viability of imported coal, the shift of cargo to Mumbai ports at the start of the Dedicated Freight Corridor and slow capex at SEZ are the risks to be considered, CLSA pointed out. Other risks include the past related-party transactions and promoter pledge of Adani Ports stock, CLSA said.
Adani Ports share price traded 0.44 per cent higher at ₹813.15 around 9:40 am on BSE. The stock is down about a per cent this year so far while the equity benchmark Sensex is up nearly 9 per cent.
Adani Group stocks suffered strong losses in January and February this year after the Hindenburg episode.
The Organized Crime and Corruption Reporting Project (OCCRP) recently reported that people with ties to the Adani family secretly held significant stakes in group entities in possible violation of the country’s law on maximum ownership by promoters in listed entities, through some of these funds.
Read more: 6 of 8 funds used to invest in Adani shut
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Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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