Adani Ports Set To Beat FY24 Guidance With Accelerated Cargo Growth: Brokerages

Taking Adani Ports and Special Economic Zone Ltd. is well positioned to surpass revised guidance of the financial year and it expects acceleration in India's port-cargo volume growth due to substantial improvement in in-land logistics and port capacity, according to brokerages.

The company is well positioned to grow reasonably faster than industry due to its presence across both coasts of India, Citi Research said in a note.

A big part of the strategy is to grow sticky cargo by providing customised services — customised infrastructure at ports, dedicated inland logistics such as trains and multi-modal logistics parks — and strategic joint ventures with large customers in global shipping lines, Citi said.

Adani Ports has completed substantial mergers and acquisitions in India over the past few years and not many opportunities seem left domestically now. Focus is on growing internationally in a value-accretive and risk-controlled manner, the note said.

Due to a strong performance in the first nine months, Adani Ports increased its cargo guidance to 400 million tonnes from 370–390 MT for the fiscal and the Ebitda guidance to Rs 15,000 crore from Rs 14,500–15,000 crore at the time of the third-quarter results, Citi said.

• Citi has a 'buy' rating on the stock with a target price of Rs 1,564. This implies an upside of 11.7%.

• Adani Ports remains Citi's top pick in India infrastructure space.

• Growing market share is visible from numbers, balance sheet health improves.

• Adani Ports' dominance in the port sector continues to increase with strong cash flows. Recent results also show strong traction in the logistics business with a 12% market share in container train operations.

• Rail container volume grew 17% year-on-year and bulk volume grew 55% year-on-year in the third quarter.

• Adani Logistics has a 13% market share in container logistics now and is confident of growing its market share at a fast pace.

• Haifa port has already achieved a guided volume of 12 MT for the fiscal. Once things stabilise, volume growth will improve to a 5–7% compound annual growth rate.

• The research firm has a 'buy' rating on the stock with a target price of Rs 1,560. This implies an upside of 17.7%.

• HSBC Global Research views Adani Ports as a long-term play on India's trade and infrastructure growth.

• "We think its diverse and sticky cargo (54% of total as of FY23) should buffer the impact of near-term trade uncertainties, while vertical integration and the addition of Vizhinjam and Colombo terminals should strengthen its capacity and pricing power, particularly in the East Coast of India," it said in a March 12 note.

• The research firm lifted the throughput assumptions for FY24–26 by 2% to reflect the solid port throughput growth in January–February 2024.

• HSBC also raised the Ebitda forecasts by 1% in FY24 and 3–4% for FY25–26 on the higher port throughput assumptions and slightly higher margins for its logistics business.

• The research firm has reiterated a 'buy' rating on the stock but increased the target price to Rs 1,600 apiece from Rs 1,470 per share on consistent outperformance in cargo volumes.

• The company continues to gain market share while generating strong cash flows and maintaining its leverage position, with a net debt-to-Ebitda ratio of 2.5 times as of December.

• Motilal Oswal increases the volume estimates by 2–3% for FY24–26. "Over FY24–26, we expect APSEZ to register 10% volume growth and a CAGR of 15%/16%/18% in revenue/Ebitda/PAT," it said.

• The management expects substantial growth in the logistics segment, driven by capacity expansions in rakes, MMLPs, warehouses and agri-silos.

• The company has seen an improvement in margins, which have risen from 17–18% in FY18 to 29–30% currently, enhancing its return profile.

Shares of Adani Ports rose as much as 1.51% during the day to Rs 1,346.95 apiece on the NSE. The stock was trading 0.46% higher at Rs 1,333 per share, compared to a 0.5% rise in the benchmark Nifty 50 at 10:06 a.m.

Nineteen out of the 21 analysts tracking the company have a 'buy' rating on the stock and two recommend 'hold', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 3.7%.

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