Buy Adani Ports and SEZ; target of Rs 1560: Motilal Oswal

Motilal Oswal's research report on Adani Ports and SEZ

APSEZ has announced the acquisition of Abbot Point Port Holdings Pte. Ltd (APPH), Singapore, from Carmichael Rail and Port Singapore Holdings Pte. Ltd (CRPSHPL) through a non-cash share-swap transaction. CRPSHPL is a related party. APPH holds the entities that own and operate the North Queensland Export Terminal (NQXT), a dedicated export terminal with a current nameplate capacity of 50mtpa. The terminal is located at the Port of Abbot Point, ~25km north of Bowen, in North Queensland on Australia’s east coast. The acquisition of APPH is being executed at an enterprise value of AUD3.97b (AUD3.15b equity value and AUD819m net debt). APSEZ will issue 143.8m new equity shares under the preferential allotment route to CRPSHPL, which will result in a net increase of 2.13% in promoter group holding. The acquisition implies an EV/EBITDA multiple of ~17x on FY25E EBITDA (10x based on FY29E EBITDA of AUD400m).

Outlook

We have retained our estimates for now and would update our growth forecasts once the acquisition is completed. We expect APSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a CAGR of 14%/16%/21% in revenue/EBITDA/PAT over FY24-27. We reiterate our BUY rating with a TP of INR1,560 (premised on 15x FY27 EV/EBITDA).