Adani Ports And Special Economic Zone share price rose 3 percent in the early trade on October 6, a day after the company announced the completion of the acquisition of the Krishnapatnam Port Company (KPCL) for an enterprise value of Rs 12,000 crore.
APSEZ now has a controlling stake of 75 percent in KPCL, a multi-cargo port in southern Andhra Pradesh.
The acquisition would accelerate APSEZ’s stride towards 500 MMT by 2025 and was another step towards implementing the strategy of cargo parity between the west and the east coasts of India, the Gautam Adani company said in a release.
Here is what brokerages have to say on the acquisition:
Nomura | Rating: Buy | Target: Rs 420
Krishnapatnam Port acquisition was at EV of Rs 12,000 crore versus the previous value of Rs 13,572 crore, so the new deal value accretive by Rs 10.40 per share for equity holders.
The company’s FY21 EBITDA estimates largely incorporate the COVID-19 impact, while management’s estimate of EBITDA of Rs 1,200 crore seems realistic.
Citi | Rating: Buy | Target: Rs 402
The research house expects FY21 EBITDA of Rs 1,200 crore from Krishnapatnam Port, while the company targets to double KPCL’s EBITDA by FY23. The valuations are looking attractive at current levels.
Morgan Stanley | Rating: Overweight | Target: Rs 396
The acquisition brings in east coast parity, as volumes will cross >100 mmt in FY22. The management targets KPCL’s volumes of 100 mmt by FY25, while the company looks to double KPCL’s EBITDA by FY23 & RoCE of 17 percent (vs 8 percent).
Macquarie | Rating: Outperform | Target: Raised to Rs 425 from Rs 390
The broking house raises FY22/23 EPS estimates by 9 percent. The company completed the acquisition of Krishnapatnam Port with a lower equity payment.
KPCL enhances the company’s reach to 90 percent of India’s economic hinterland, while its dependence on coal volumes might be a growth dampener.
CLSA | Rating: Upgrade to buy from outperform | Target: Raised to Rs 425 from Rs 386
The acquisition will solidify the company’s hold over the east coast. The company aims to double KPCL’s EBITDA in three years and volumes in five years.
KPCL M&A is likely to improve the company’s earnings quality. CLSA has raised EPS estimates by 6-10% over FY22-23.
At 0921 hours, Adani Ports and Special Economic Zone was quoting at Rs 359.49, up Rs 8.90, or 2.53 percent on the BSE.