Adani Ports share price targets post Q2 results suggest up to 30% upside potential

Adani Ports & Special Economic Zone Ltd (Adani Ports), with its Q2 revenue growth of 28 per cent, managed to beat analyst estimates, even as profit was hurt by a MAT credit write-off. With cargo volumes of 240 mmt in April-October period, analysts said the Adani group firm is on track to achieve higher end of FY24 cargo volume guidance of 370-390 mmt, as they maintained their 'Buy' calls on the stock. A few brokerages have share price targets of up to Rs 1,150 on the stock, which suggests up to 30 per cent potential upside on the counter.

"Adani Ports reported a decent Q2FY24 with stable operational numbers; PAT, however, was marred by a MAT credit write-off. H1 cargo volumes at 203 mmt were robust led by broad-based growth across dry, liquid and container cargoes. Net debt-to-Ebitda improved to 2.8 times from 3.1 times in March 2023. The logistics business turned in an improvement in utilisation despite rapid capacity expansion. Overall results were decent and operationally in-line," Nuvama Institutional Equities said.

The brokerage, which has a target of 958 on the stock, said Adani Ports' strategy to expand its prevailing facilities and diversify should aid growth with moderate capex. The logistics business, it said, is sustaining rapid growth and has synergies with the port business.

Jefferies maintained its 'Buy' on Adani Ports with a share price target  of Rs 985. CLSA finds the stock worth Rs 878.

Adani Ports had in May guided for cargo volumes of 370-390 mmt for FY24, resulting in a revenue of Rs 24,000-25,000 crore and Ebitda of Rs 14,500-15,000 crore. Total capex during the year, the Adani group firm said, is expected to be Rs 4,000-4,500 crore. In April October, Adani Ports handled 240 mmt of cargo vis-à-vis its FY24 guidance of 370-390 mmt. It is targeting 500 MMT of cargo volumes by the end of CY25, and analysts said the Adani firm is on track to achieve the goal.

"Adani Ports has guided for cargo volumes to the tune of 500 mm for FY25E (including Haifa and Vizhinjam), which, in our view, is reasonably robust. More importantly, the logistics business continues to outpace peers with a total of 10 MMLPs and two more to come during the year. With robust growth and prudent spending on capex, we expect the returns ratios and debt metrics to improve over the next couple of years," Nuvama said.

Motilal Oswal Securities said Adani Ports' market leadership in the ports segment and focus on delivering integrated logistics solutions places the company in a sweet spot. "The operational ramp-up at recently acquired ports is expected to drive a 13 per cent growth in cargo volumes over FY23-25. This would drive a revenue/ Ebitda/PAT CAGR of 20 per cent, 17 per cent and 12 per cent,  over FY23-25," it said while suggesting a target of Rs 1,050 on the stock.

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