Adani Ports rises on robust Q4 results; brokerages raise target price on strong outlook

The company plans to invest Rs10500-11500 crore in capital expenditure

Shares of Adani Ports and Special Economic Zone Limited (ASPEZ) gained on May 3 after the company reported healthy earnings for the quarter ended March 2024. Brokerages largely retained bullish calls on the stock, given the firm's sound business fundamentals, sustainable market share gains at Mundra, expansion of LPG, LNG terminals, and the upcoming Vizhingham port.

Adani Ports is anticipated to outpace India's overall growth, driven by a balanced port mix along India's western and eastern coastlines and a diversified cargo mix, said Motilal Oswal.

"Acquisition on the port side along with multi-fold capacity creation in the logistic business should unleash multi-year growth prospects for ASPEZ," said Nuvama Institutional Equities.

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In Q4FY24, Adani Ports' net profit surged 76 percent year-on-year to Rs 2,040 crore, helped by a jump in cargo volumes. The Adani Group firm's revenue from operations rose 19 percent YoY to Rs 6,897 crore.

The company continues to invest heavily in the ports and logistics business to drive growth. "The newly launched trucking segment enables APSEZ to provide the last-mile connectivity solution to its customers," said Motilal Oswal.

The brokerage expects the port major to report 11 percent growth in cargo volumes over FY24-26 which would drive CAGR of 14, 15, and 19 percent in revenue, EBITDA, and PAT respectively.

Motilal Oswal maintained a 'buy' rating on the stock with a revised target price of Rs 1,550 per share.

HSBC is optimistic about Adani Ports, maintaining a buy call with a target of Rs 1,560 per share. Adani group firm's FY25 guidance implies 10-14 percent in FY25 which, the brokerage believes, is achievable. Furthermore, HSBC predicts a 15 percent EBITDA compound annual growth rate (CAGR) between FY24-27, with estimated EBITDA for FY25 surpassing the upper limit of the company's guidance range by 4 percent.

The firm highlights Adani Ports' robust ports and logistics ecosystem, considering it the strongest within their coverage of Asia's transport sector.

Jefferies has reaffirmed its buy recommendation on Adani Ports, with the target price raised to Rs 1,640 per share. Despite the company's Q4 EBITDA being 5 percent lower than anticipated due to slightly lower realizations, the management expressed confidence in achieving double-digit growth.

The company's FY25 volume guidance of 460-480 million metric tons (a 10-14 percent increase YoY) aligns with expectations.

Adani Ports remains focused on prudent capital expenditure and returns, while ongoing market share gains and the commissioning of the Dedicated Freight Corridor (DFC) at Mundra are supportive factors. Additionally, the potential in logistics serves as an additional incentive by analysts at Jefferies.

Also Read | Adani Ports Q4 net profit rises 76% to Rs 2,040 cr, declares Rs 6 dividend

Nuvama is bullish on Adani Ports as it believes that the company stands to benefit from the consolidation of volumes in the shipping industry, as larger vessels are deployed and routes are consolidated, favoring ports with strong origin and destination demand. With its scale, pan-India presence, and existing relationships with container liner companies, Adani Ports is well-positioned to capitalize on this trend, it said.

Moreover, the company has set high cargo volume targets, with a revised target of 500 million metric tons for FY25 post the acquisition of Krishnapatnam Port, indicating an 18 percent AGR over FY20.

Despite the ambitious target, Nuvama believes in the company's execution capabilities and proven track record of volume ramp-up, providing confidence in cargo growth visibility. The brokerage maintained a 'buy' call on the stock but raised their target price to Rs 1,574.

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