Adani Ports shares: CLSA maintains buy rating, expects a strong Q2; Check the target price

Shares of Adani Ports and Special Economic Zone (Adani Ports) continue to hog limelight at Dalal Street as the global brokerage firm CLSA expects Adani Group's blue-chip player to report a strong September 2023 quarter despite slowing global trade, with August 2023 traffic rising 17 per cent on a year-on-year (YoY) basis and up 13 per cent YoY ex-Haifa acquisition.

Ports traffic was led by containers and gasification of cargo mix of traffic, while coal imports picked up following a demand spike, improved viability and a government decree. Its flagship, Mundra Port, saw a resurgence with all-time high traffic in August 2023, led by container and coal traffic on a power demand spike met by improved viability of imported coal, said CLSA.

Adani Group’s flagship Mundra port handled the highest-ever monthly cargo volume in August. The port handled 15.32 MMT of cargo volume in August this year. It also handled 1,776 trains in the same period, which includes 1,532 container trains, according to a company filing on Monday.

Shares of Adani Ports settled marginally higher on Thursday at Rs 809.60, with a total market capitalization of close to Rs 1.75 lakh crore. The scrip has surged more than 105 per cent from its 52-week low at Rs 394.95 hit in February 2023 after the reports from the US-based short seller Hindenburg Research.

Adani Ports operates the Mundra port, which is the largest container handling port in India, having handled more than 6.6 million TEUs in FY23, making it an integral gateway to the north and central parts of the country. In May this year, Adani Group’s Adani Ports handled the highest-ever rail cargo of 120.51 MMT in FY2022-23, surpassing the previous best of 98.61 MMT.

Adani Ports' traffic grew 12 per cent YoY in 1QFY24 led by coal and containers. This was in spite of a 6-day cyclone impact hurting 50 per cent of its capacity and causing a 2 mt loss of traffic. Market share losses in the container market ceased as its terminals in the south regained share.

Its M&A strategy has paid dividends, with Krishnapatnam Port growing volume by 31 per cent YoY, leading its coal volume in Q1FY24. Mundra Port retained its numero uno container port status, and with the opening of a new berth, T3, its capacity should be further enhanced by 800K TEUs by 3QFY24, CLSA added.

The key bright spot was also logistics, with higher bulk volume (up 42 per cent YoY) and rail container traffic up 24 per cent YoY. Overall, we believe this strategic asset remains on track to gain share and grow ahead of the market, which deserves re-rating, added CLSA maintaining a buy rating with a target price of Rs 878 per share.

 

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