Adani Ports shares: Why do analysts see up to 45% upside on this Adani stock?

Domestic brokerages continue to remain positive on Adani Ports & Special Economic Zone as the Adani Group firm announced the acquisition of 100 per cent equity stake in Singapore-based Abbot Point Port Holdings Pte (holding company of North Queensland Export Terminal - NQXT) from Carmichael Rail and Port Singapore Holdings (CRPSHPL-promoter group company).

The deal is likely to happen at an enterprise value (EV) of AUD 3.98 billion and shall issue 143.8 million equity shares at Rs 1200 apiece, valued at AUD 3.16 billion. The port has 50 mt capacity. This will be the key to achieving the targeted 150 million tonnes of international port volume by 2030, a strategic diversification to achieve a total 1 billion tonne volume.

Following the announcement, shares of Adani Ports dropped nearly 4 per cent to Rs 1,209.75 during the session, but the stock finally settled near Rs 1,243.90 on Monday, down 1.27 per cent for the day. The company commanded a total market capitalization close to Rs 2.70 lakh crore.

This acquisition fits into Adani Port's international east-west trade corridor strategy with NQXT providing strong visibility on earnings/cash flows, believe the brokerage firms. The acquisition ticks all the boxes, given presence across East-West trade corridor, ample growth potential, value accretion, stable country dynamics and ecosystem support aided via captive volumes, they say.

NQXT is a critical export gateway for producers in resource-rich Queensland, Australia and has a current capacity of 50MTPA and has over 80 per cent of capacity contracted. It has a long remaining lease life of 85 years until 2110.  NQST is poised for strong growth led by volume growth, price resets and efficiencies, said Nuvama Institutional Equities.

"We estimate the NQXT acquisition shall lead to 6–7 per cent addition to Adani Ports consolidated volume/revenue/EBITDA in FY26; 2 per cent EPS dilution in FY26; 200 bps impact on pre-tax RoCE/RoIC; and no material impact on net debt/EBITDA profile, around 2.1x times," Nuvama added. It has a 'buy' rating on it with a target price of Rs 1,770, suggesting a 45 per cent upside.

The acquisition would provide a boost to international cargo operations. The nameplate capacity is 50mtpa currently. After the acquisition, Adani Ports targets a higher contracted capacity, contract renewals (improved pricing) and APSEZ group synergies, which would boost EBITDA. It expects EBITDA to reach AUD 400 million by FY29, said Motilal Oswal Financial Services.

"We have retained our estimates for now and would update our growth forecasts once the acquisition is completed. We expect Adani Ports to report 10 per cent growth in cargo volumes over FY24-27. This would drive a CAGR of 14 per cent/16 per cent/21 per cent in revenue/EBITDA/PAT over FY24-27. We reiterate our 'buy' rating with a target price of Rs 1,560," it added.

Post this acquisition, international ports of Haifa, Tanzania, Colombo and Abbot Point will together contribute 80 million tonnes, which may be scaled up to 150 million tonnes by 2030 via planned capacity expansion and ramp-up in operations said Elara Capital.

"We expect the acquisition to be EBITDA positive but due to high depreciation, accretion to net profit may be marginal in near term. We maintain our estimates of 'buy' rating with target price at Rs 1,700, valuing Ports at an EV/EBITDA of 19 times and logistics at 8 times on FY27E," it added.