Adani Ports & SEZ Ltd tops the optimism list in January, with upgrades in comparison to three months ago, according to the latest data from Moneycontrol's Analyst Call Tracker. The tracker reveals that 17 analysts have issued buy calls for the stock, with zero sell and hold ratings, compared to 16 buy calls and two hold ratings a quarter ago.
This optimism persists even though the stock has declined nearly 13 percent so far in 2025 and weaker December quarter earnings. So, what is driving the bullish sentiment on Adani Ports despite the recent decline?
Adani Ports & SEZ (APSEZ) has transformed from a ports utility business to a transport utility through aggressive expansion, aiming to leverage its SEZ land bank, multimodal logistics hubs, and warehousing capacity. The company's capacity additions in rail and its recent focus on road transport, with the launch of a trucking management service, are expected to develop end-to-end capabilities, supported by a robust port network that covers approximately 90% of the hinterland.
Although volume growth for the quarter was muted for the December quarter, particularly due to the impact on bulk cargo, both EBITDA and PAT exceeded estimates by 9% and 8%, respectively. Management has maintained a volume growth target of 10%-15%, expecting to handle 460-480 million tonnes. Additionally, EBITDA guidance has been increased by 5%, with a target of Rs 189 billion in FY25.
Experts believe Adani Ports will continue to outperform the industry, driven by its ongoing expansion in both domestic and international markets and its development of end-to-end supply chain capabilities.
Furthermore, APSEZ remains committed to maintaining strong balance sheet discipline. The company's net debt-to-EBITDA ratio has improved from 3.3x in FY21 to 2.0x in H1FY25, well within the ceiling of 3.5x. APSEZ expects an 18% CAGR in OCF (Operating Cash Flow), reaching Rs 345 billion by FY29.
This implies a 95% OCF/EBITDA ratio in FY29, comfortably covering its projected capex of Rs 800 billion (excluding acquisitions) and debt repayments of Rs 250 billion (without refinancing measures). The cumulative OCF for FY24-29 is expected to reach Rs 1.3 trillion, reinforcing the company's strong financial position.
According to a recent Ventura report, Adani Ports is committed to future growth through continued investments in both ports and end-to-end logistics, with plans to double port capacity and triple logistics capacity by FY29. Over the period FY24-27E, APSEZ’s revenue, EBITDA, and net profit are expected to grow at a CAGR of 21.4%, 19.0%, and 21.9%, respectively, reaching Rs 47,797 crore, Rs 26,695 crore, and Rs14,695 crore.
Despite this strong growth outlook, EBITDA margins are projected to contract by 341 bps to 55.9%, due to the rising contribution from the logistics segment, which operates at lower margins compared to the ports business. However, net margins are anticipated to improve by 38 bps to 30.7%, supported by reduced interest costs from lower debt requirements.
The company maintains a solid financial position with a working capital-to-sales ratio of under 8%, reducing short-term funding needs. Additionally, net debt stands at Rs 36,718 crore, with a net debt-to-equity ratio of 0.7X and a net debt-to-EBITDA ratio of 2.1X, ensuring balance sheet strength and financial stability, the brokerage said.
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