Adani Ports & Special Economic Zone Ltd share price rebounded over 3% on Tuesday’s session after tumbling by almost 5% on Monday due to concerns about conflict in Israel, where the company owns a key port. Adani Ports share price opened at an intraday low of ₹799.95 apiece on BSE. Adani Ports & SEZ share price touched an intraday high of ₹817.
Analysts indicated that even in the worst case, the impact of events in Israel would be low on Adani Ports & Special Economic Zone, which led to the upward trend of the Adani Ports stock price.
Adani Ports said in an exchange filing on Monday that it is closely watching the crisis in Israel and is ready with a business continuity plan.
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“We are closely monitoring the action on ground which is concentrated in South Israel, whereas Haifa port is situated in the North. We have taken measures to ensure safety of our employees and all of them are safe. We remain fully alert and prepared with a business continuity plan that will enable us to respond effectively to any eventuality.
The overall contribution of Haifa in APSEZ’s numbers is relatively small at 3% of the total cargo volume. For the current financial year (Apr 23-Mar 24), we have guided for Haifa Cargo volumes range of 10-12 MMT and APSEZ’s total cargo volume guidance of 370-390 MMT. In the initial six months (Apr-Sep 23), APSEZ’s total cargo volume was about 203 MMT, of which the Haifa share is about 6 MMT. We stay confident of APSEZs business performance,” the company said in its filing.
Also Read: Adani Ports share price Today Live Updates : Adani Ports Surges in Trading Today
Other Adani group stocks today were also trading in green. Shares of Adani Enterprises, Adani Power, Adani Energy Solutions, Adani Green Energy, Adani Total Gas, Adani Wilmar, ACC, Ambuja Cements, and NDTV gained about 0.5% to 3% on Tuesday’s trade.
Let’s look at what the brokerages have to say regarding the impact of the Israel conflicts on Adani Ports.
CLSA – Conflict – an opportunity
A 5% decline in the share price of Adani Ports & SEZ due to war concerns, according to international brokerage CLSA, gives an even greater opportunity to purchase this important asset with long-term concessions across India, as Haifa Port only contributes 1.3%.
“We believe due to the Israel conflict potentially hurting its newly-acquired Haifa port. ADSEZ acquired the Haifa Port Co. (HPC) in Israel’s privatisation efforts via a 70:30 JV with Gadot Group at an EV of US$530m. HPC is a profit-making port focused on bulk and containers, with scope for operating leverage by reducing employee costs, per its retirement plan, and long-term real estate development upside. HPC accounted for 3% to ADSEZ’s 1HFY24 volume and it expects a pay-back of 4/6 years under base case/worst case scenarios,” CLSA said in its report.
The global brokerage has a ‘buy’ rating on the stock with a price target of ₹878, and sees potential upside of 11% from the market price of ₹789.90.
Also Read:Israel-Hamas War LIVE Updates: ‘Rafah crossing is still open’, Israeli Military’s advice to Palestinians
InCred Equities
Even in the worst-case scenario, the brokerage claimed in its analysis, the impact of events in Israel on Adani Port would be minimal.
“Israel has 5 ports, all under “Israel Port Authority”. 3 are major commercial ports – Haifa, Ashdod and Eilat. Over 2011-21, cargo has grown at 2.7% CAGR. Container (31MT) comprised 52% of Israel’s port cargo (60MT) in 2021 and grew at 2.6% CAGR. Haifa Port (56% of Israel’s 2021 cargo) is a multi-cargo port in North Israel.
In case of any temporary disruption in volumes at Haifa, it should not have a material impact on APSEZ volume number for FY24. In case of damage to the port, the maximum theoretical impact/ write-off would be limited to Rs30/sh (3-4% of CMP of APSEZ), the brokerage said.
The brokerage has ‘hold’ rating on the stock and target price of ₹868.
Motilal Oswal Financial Services
The domestic brokerage has a ‘buy’ rating on the stock with price target of ₹1,010 and sees 28% potential upside for the stock from the current market price of ₹790.
“We initiate coverage on the stock with a BUY rating and a target price of ₹1,010 (premised on 15x FY25E EV/EBITDA, in line with its historical average of 14x). The company’s: a) market leadership in the ports segment, b) focus on value-added areas such as logistics, and c) focus on strategic acquisitions place it in a sweet spot.
In FY23, Adani Ports has acquired 70% stake in Israel’s Haifa Port in consortium with Israel’s Gadot Group for a consideration of $1.2 billion. Haifa is one of Israel’s two biggest commercial ports and handles nearly half of Israel’s container cargo,” the brokerage said in its report.
Also Read: Adani Ports share price Today Live Updates : Adani Ports closed today at ₹789.9, down -4.89% from yesterday’s ₹830.55
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