Adani Ports Gets Target Price Upgrade As Citi Ranks It Among Top Infrastructure Bets

Citigroup has upgraded the target price for Adani Ports and Special Economic Zone Ltd. on the possibility of a re-rating.

The agency rates the stock as a 'buy', citing attractive valuations and a strong business, according to a note on Tuesday.

Citi raised its target price for Adani Ports to Rs 1,213 per share from Rs 972 apiece, marking it as one of its top infrastructure picks. That implies an upside of 19.7% from Tuesday's close.

While some overhang of negative news flows around the conglomerate remains, it is unlikely to result in any substantial impact on the underlying business of Adani Ports, Citi said.

"Balance sheet and cash flows have been strong, and Adani Ports has bought back its US dollar bonds," it said. "Promoters have increased stake to 65.53% in September 2023 from 61.03% in March 2023 and promoter pledges are now down to minuscule level of 2.44% of promoter stake."

Citi also increased the target EV-to-Ebitda ratio to 18 times from 16 times earlier. The action came on the back of continued strong traction in business and expected improvement in sentiment with respect to Adani Group in future, it said.

In an earlier note, Goldman Sachs Group Inc. had raised its earnings estimates for Adani Ports, citing healthy growth, potential market share gains and pricing power from a unique fully integrated logistics business.

The brokerage increased its target price for the stock to Rs 855 from Rs 820, implying an upside return potential of 7.85%, while maintaining its 'buy' rating.

Meanwhile, Kotak Institutional Equities raised Adani Ports' Ebitda estimates, citing market-share gains on operational efficiencies and cargo diversification as India's largest private-port operator.

The brokerage maintains a 'buy' rating with a target price of Rs 1,060, implying an upside return potential of 20.5%. Kotak increased its fair value by 12% to Rs 1,060 on account of roll-forward and a lower cost of capital of 11.25%.

Shares of Adani Ports were trading 3% higher at Rs 1,043.45 apiece on the NSE compared to a 0.37% advance in the benchmark Nifty 50 as of 11:08 a.m. The stock has risen 25.3% year-to-date. The RSI for the scrip stood at 88 as of 9:40 a.m., indicating that the stock may be overbought. The volume was 29 times its 30-day average.

Nineteen out of the 20 analysts tracking the stock have a 'buy' rating on the stock, while one suggests 'hold'. The average of 12-month analyst price targets implies a potential downside of 9.9%.

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