Adani Ports shares in focus post Q4 results. Nuvama sees 30% upside for Adani group stock

Shares of Adani Ports & Special Economic Zone Ltd will be in focus on Wednesday morning after the Adani group firm reported a 5 per cent rise in net profit at Rs 1,159 crore for the March quarter compared with a profit of Rs 1,103 crore in the same quarter last year. Revenue for Adani Ports jumped 40 per cent to Rs 5,797 crore for the quarter from Rs 4,141 crore in the year-ago quarter.

Adani Ports has guided cargo volumes to the tune of 370–390 million metric tonne (mmt) for FY24E (including Haifa) along with a revenue and Ebitda guidance of Rs 24,000 crore and Rs 14,500 crore, respectively. Nuvama Institutional Equities said the guidance is reasonably robust.

The brokerage said Adani Ports ended FY23 on a strong note with an all-time-high revenue and Ebitda, beating consensus on operational metrics. It said that March quarter PAT, however, was marred by an impairment on Myanmar asset, which was divested during FY23. Higher employee and other costs were largely because of the Haifa acquisition, it said. Adjusted for these one-offs, core operational results were strong and ahead of estimates, the brokerage noted.

"More importantly, the logistics business continues to outpace peers with three new MMLPs added during the year. With robust growth and prudent spending on capex, we see return ratios and debt metrics improving in the next couple of years. Reduction in pledged shares to 4.6 per cent in March 23 should also be a key positive for the stock," the brokerage said as it sees the stock at Rs 956. The target suggests a 30 per cent upside over Tuesday’s closing price of Rs 734.30.

Kotak Institutional Equities said it continues to build in a high 14 per cent CoE and would await further progress on the
reduction in cash flow items linked to ICD given/received (gross amount high though down 50 per cent YoY) and further clarification in large outstanding security deposits given to EPC contractors against capital commitment (have declined for the second-straight year).

This brokerage has cut its FY2024-25 Ebitda estimates by 2 per cent, but increased its fair value on the stock to Rs 835 from Rs810 on roll-forward.

Nuvama said Adani Ports continues to add its offerings aggressively across the businesses in order to provide end-to-end solutions, which is a key differentiator in adding volumes and achieving the transport utility status. FY24E growth should sustain valuation multiples, it said.

For Q4FY23, APSEZ posted an operationally robust quarter as cargo and container volumes grew 11 per cent and 15 per cent, respectively. Non-Mundra volume grew 11 per cent YoY, compared to the 3 per cent YoY growth in Mundra volumes.

"This reflects the diversification efforts made by APSEZ, as non-Mundra share in cargo volumes has reached 54 per cent. Q4FY23 revenue and Ebitda, both were up 21% QoQ and Ebitda margins came in at 56.4 per cent in Q4FY23, sequentially stable versus 56.3 per cent witnessed in Q3FY23. During the quarter, APSEZ re-evaluated the asset value of Myanmar terminal and recorded an impairment of Rs 1,273 crore factoring in the net impact of transaction. All in all, operationally it was one the strongest quarters for APSEZ," Nuvama said.