Buy Adani Ports, 21% upside likely, says Motilal as it shares target price for Adani stock

Adani Ports & Special Economic Zone Ltd (APSEZ) has revised target price by Motilal Oswal Securities as the brokerage maintained its 'Buy' rating on the stock suggesting a likely 21 per cent upside ahead. Adani Ports, it said, has a diversified cargo mix along with sticky cargo and customer base.

The domestic brokerage said APSEZ is well on track to cross its revised cargo volume guidance of 400 mmt in FY24. It continues to gain market share while generating strong cash flows and maintaining its leverage position, with a net debt-to-Ebitda ratio of 2.5 times, the domestic brokerage cited while upping its volume estimates for the Adani group firm by 2-3 per cent for FY24-26.

Over FY24-26, Motilal Oswal expects APSEZ to register 10 per cent volume growth and a CAGR of 15 per cent in sales, 16 per cent in Ebitda and 18 per cent in profit after tax.

"With consistent outperformance in cargo volumes, we increase the target multiple to 17 times EV/Ebitda(earlier 16 times) and reiterate our BUY rating with a revised target price of Rs 1,600," it said.

Adani Ports is continuously investing in building infrastructure for its logistics business, which is expected to improve long-term cash flows and earnings for the company, Motilal Oswal said.

"APSEZ has an extensive pan-India presence, strong pricing power and a high proportion of sticky cargo (over 50 per cent). With robust volume driven by consistent markets share gains, APSEZ recorded its strongest 9M performance in FY24, with the highest-ever revenue, EBITDA, and cargo volumes till date," the broking firm said.

The brokerage said APSEZ has a diversified cargo mix along with sticky cargo and customer base. APSEZ reported a robust cargo volume of 382 mmt in the 11 months of FY24. The management recently revised its FY24 cargo volume guidance to 400 mmt from 380 mmt earlier.

Motilal Oswal has a target price of Rs 1,600 on Adani Ports shares.