Analysts were bullish on Adani Ports And Special Economic Zone Ltd.'s decision to buy majority stake in Krishnapatnam Port Co. Ltd.
Brokerages gave the thumbs-up to the acquisition plan at a cost of Rs 5,520 crore as it is at an attractive valuation and is earnings accretive. India's largest multi-port operator, which has a strong presence in western India, will control five ports on the eastern coast after its acquisition of Krishnapatnam Port is completed.
The deal fits well with Adani Ports' strategy to increase its footprint in Andhra Pradesh and nearly double its cargo throughput to 400 million metric tonnes by financial year 2024-25 via expansion and acquisitions.
Here's what brokerages have to say about Adani Ports' proposed acquisition.
IDFC Securities
- Maintains ‘Buy' rating with target price of Rs 466.
- Acquisition is in line with strategy to grow port volumes through organic/inorganic measures.
- Believes acquisition is attractively valued, considering the presence it would be getting in Andhra Pradesh in return.
CLSA
- Maintains ‘Buy' rating with target price of Rs 485.
- The largest port M&A deal at an attractive valuation will solidify Adani Ports' hold on the eastern coast.
- The M&A deal is likely to improve earnings quality; yield on this acquisition is likely to be 11.4 percent in FY21.
- The strategic asset is likely to deliver 14 percent growth in port Ebitda over FY19-21.
Morgan Stanley
- Maintains ‘Overweight' with target price of Rs 433.
- Acquisition helps it establish a presence in Andhra Pradesh and complement coastal movement from Dhamra port in Odisha.
Edelweiss
- Maintains ‘Buy' with target price of Rs 450.
- Acquisition to help fast-track target of 400 mmtpa in cargo volumes.
- Acquisition is putting capital to work in a depressed environment.
- KPCL's volume success hinges on diversification from coal volumes.
IIFL
- Maintains ‘Buy' rating with target price of Rs 400.
- Company confident of improving profitability; believe this can be achieved.
- Acquisition to be earnings accretive; see this acquisition as a positive.
- Seamless execution holds key.
Centrum Broking
- Unrated.
- Strong cash generation gives an ability to aggregate high quality assets at reasonable valuations.
- Acquisition gives Adani Ports a sizeable and scalable presence in Andhra Pradesh.
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