Adani Ports shares headed for 33% upside? Here's what brokerages have to say

Adani Ports and Special Economic Zone (APSEZ) might have disappointed Dalal Street on the earnings front, but it continued to attract analysts as they suggest a potential upside of 33 per cent in the stock price.

Adani Ports reported a 5 per cent year-on-year (YoY) rise in its consolidated net profit at Rs 1,159 crore for the quarter ending March 31, 2023. It reported a net profit of Rs 1,103 crore in the year-ago period. The company's revenue from operations rose 40 per cent to Rs 5,797 crore in Q4FY23 as against Rs 4,141 crore in Q4FY22.

For the entire year ended on March 31, 2023, Adani Ports reported a 9 per cent rise in the net profit at Rs 5,310 crore, which was Rs 4,886 crore the year ago. The revenue from operations came in at Rs 20,852 crore, up 22 per cent from the previous year. The company also announced a dividend of Rs 5 per share for the shareholders for FY23.

"FY23 has been a stellar year for APSEZ in operational as well as financial performance. The company has overachieved against its highest-ever revenue and EBITDA guidance provided at the beginning of the year. Our strategy of geographical diversification, cargo mix diversification, and business model transition to a transport utility is enabling robust growth," said Karan Adani, CEO at APSEZ.

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Adani Ports reported in-line results adjusted for the Haifa consolidation. More importantly, it sustained net debt to EBITDA at 3 times YoY in spite of the large investments made in FY2023. It expects FY2024 to see healthy mid-teens growth and a material decline in net debt to EBITDA to 2.5 times, said Kotak Institutional Equities.

"We marginally cut our estimates and increased fair value to Rs 835 from Rs 810 on roll-forward. We continue to build at a high 14 per cent CoE and would await further progress on the reduction in cash flow items linked to ICD given/received and further clarification/reduction in large outstanding security deposits given to EPC contractors against capital commitment," it added.

In spite of current weakness in the EXIM sector, Adani Ports has maintained its FY24 guidance, which includes 10-12 MMT volumes from newly acquired Karaikal port, ICICIDirect said in its first cut.

"Further, it has prioritized loan payoff versus capex in FY24. Logistics vertical continued to see strong growth, up 47 per cent YoY. Regarding, Concor acquisition the management will cautiously take a call when the divestment resumes," it added.

Following the announcement of Q4 results, shares of Adani Ports dropped 2 per cent to Rs 721.1 on Wednesday compared to its previous close at Rs 734.30 on Tuesday. The company was commanding a market capitalization of Rs 1.58 lakh crore during the session.

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Adjusted for Haifa consolidation, port EBITDA margin was steady at 69 per cent, up 30 bps YoY. Logistics business continues to show strong growth momentum. The management indicated port volume of 370-390mnt for FY24 (9-15 per cent YoY) while maintaining its FY25 volume target of 500mnt, said JM Financial in its report.

It maintained its guidance for revenue at Rs 24,000-25,000 crore, EBITDA at Rs 14,500-15,000 crore and CAPEX at Rs 4,000-4,500 crore and debt reduction guidance for FY24. "We raise our estimates by up to 3-4 per cent to reflect 4QFY23 performance and outlook. We maintain a 'buy' rating with a Target price of Rs 850 on the stock," said JM Financial.

Shares of Adani Ports turned multibagger from their 52-week lows at Rs 394.95 as the stock hit Rs 790 last week amid the optimism over fresh inflows, the Supreme Court verdict and sale of non-core assets. However, the stock has corrected about 9 per cent since then.

Adani Ports ended FY23 on a strong note with an all-time high revenue and EBITDA, beating consensus on operational metrics. Q4FY23 reported PAT, however, was marred by an impairment on Myanmar assets, which were divested during FY23. Higher employee and other costs were large because of the Haifa acquisition, said Nuvama Institutional Equities.

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Adjusted for these one-offs, core operational results were strong and ahead of estimates. APSEZ continues to diversify and expand across the logistics value chain. Its aggressive expansion in logistics is quite synergistic to the ports business, it added retaining a 'buy' rating with a target price of Rs 956, suggesting an upside of 33 per cent from the day's low.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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