Adani Ports shares at Rs 920? Here's why B&K sees up to 70% upside on this Adani group stock

Domestic brokerage firm B&K Securities remains positive on Adani Ports and Special Economic Zone (SEZ), even after the recent route in the Gautam Adani led bluechip counter. The brokerage sees no major stress for the company and finds valuations attractive at current levels.

"Our short liability analysis of Adani Ports, encompassing coverage ratios and debt repayment schedule, reveals no major stress for the company," said the brokerage. "Net debt-to-EBITDA stands at 2.8 times, while net debt-to-equity at end 1HFY23 was 0.97 times and FY23E interest coverage ratio is strong at 5 times," it said.

Around 69 per cent of the debt is US dollar-denominated, bulk of the repayment is slated for 2027-2032 period the B&K's report said. A significant proportion of the company’s revenue is US dollar-denominated, providing a natural hedge against rupee depreciation, it said. "The company seems to have sufficient liquidity buffer with cash and bank balances," it added.

Shares of Adani Ports jumped more than 9 per cent to Rs 596.75 on Tuesday, from its close at Rs 546 on Monday. The stock tested its 52-week low at Rs 394.95 on Friday, February 3 and has zoomed more than 50 per cent from those levels in just two sessions.

B&K Securities has maintained its buy rating with a target price of Rs 920, implying a 70 per cent upside from its previous close. "The stock is currently trading at FY24F PE of 17x which is at the lower end of historical range of 17-24 times. We value the Ports business at an EV/EBITDA of 15 times, while other businesses at an EV/EBITDA of up to 14 times" it said.

Adani Group stocks, including Adani Ports, have been on a freefall recently after Hindenburg Research's allegation of malpractices, manipulations and high leverage on the Gautam Adani-led conglomerate.

Adani Ports would announce its results for the period ending on December 31, 2022, today.

Kotak Securities had upgraded Adani Ports and SEZ to 'Buy' from 'Add' and pegged its fair value at Rs 860 per share in its report released on January 26, 2023, considering its then 11.5 times FY2024E EV/EBITDA.

"Adani Ports is a strong play on India’s port sector, having attractive characteristics – pricing power, and prospects of privatisation. It also has a strong right to win in offering an end-to-end logistics offering," it said.

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