Adani Ports & SEZ Shares Rise As Nomura Hikes Target Price

Adani Ports & Special Economic Zone Ltd. snapped its three-day losing streak after Nomura raised target price on the nation's largest port operator.

The research firm hiked its target price on the stock to Rs 890 from Rs 860, implying a potential upside of 26.6%.

The stock's price is currently attractive, Nomura said in a report, as it has declined more than 15% from June 11 to June 30, following media reports on freezing of accounts of three foreign funds that together owned shares worth over Rs 43,500 crore in four Adani Group companies.

Besides, the company's management maintained its commitment to not provide related party loans to group entities, Nomura said. “Thus, Adani Ports is largely insulated from the group's performance.” Receivables from related parties, it said, too, have reduced over FY15-21, providing additional comfort. “Related-party transactions appear to be largely cash positive for Adani Ports except for FY21 due to the acquisition of a subsidiary.”

The company has also reduced promoter share pledges significantly from the peak levels of FY20 to currently below 10%, and addressed concerns over its Myanmar project, according to the report.

According to Nomura, the concerns over potential sanction impact due to the Myanmar project seems overdone. “Investments in Myanmar port have been adversely singled out by the media despite a UN report mentioning the military links of other leading Indian and international firms,” it said. “The port concession was secured from the earlier democratic government and the maximum impact of a likely sanction on our valuation would be Rs 9 per share.”

Nomura maintained its ‘buy' rating on Adani Ports. Shares of the company rose as much as 3% to Rs 724.35 apiece during the afternoon trade on Friday. Of the 26 analysts tracking the stock, 21 have a ‘buy' rating, two suggest a ‘hold' and three recommend a ‘sell', according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 16.4%.