Adani Enterprises shows short-covering after 'buy' call by a foreign brokerage firm

Short covering

The shares of Adani Enterprises Limited (AEL) are trading with gains of over 5.5 percent even as the Nifty trades with optimism on January 29. Cantor Fitzgerald, a foreign brokerage firm, initiated coverage of AEL with an 'overweight' rating and a 12-month price target of Rs 4,368. The report says that from an infrastructure perspective, companies tied to the Adani Group are best plays to tap the India growth story.

The shares of Adani Enterprises are up by 5 percent on a year-to-date basis when the Nifty is down 0.50 percent. Adani Enterprises, the Adani Group flagship, listed in 1994, has  since compounded at 32 percent a year in dollar terms.

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According to the report by Cantor Fitzgerald,  risk reward is in favour of the investors at current levels. The report further highlights that AEL is the most relied upon company for bringing energy resources into India; it owns eight airports that account for 25 percent of airline passenger traffic and 33 percent of cargo, it is building several data centres. The foreign brokerage believes AEL's current valuation is largely driven by three main segments: airports, roads, and its new energy ecosystem which, in our view, means investors are getting a free call option on the rest of AEL's business, which accounted for 85-percent-plus of revenue in FY23 and includes many businesses that are in incubation phase and will materially contribute to financials over the coming years.

Short-covering in seen in the early hours of the trade in Adani Enterprises with open interest down by 9 percent and shares price up by over 5 percent. Adani Enterprises shares have underperformed the markets in the past one year owing to the Hindenburg report.

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