Buy Adani Ports and SEZ; target of Rs 1600: Motilal Oswal

Motilal Oswal's research report on Adani Ports and SEZ

APSEZ clocked a cargo volume of 382 MMT in 11 months of FY24, recording 24% YoY growth on YTD basis. With a monthly cargo run rate of ~35 MMT (APSEZ handled 35.4 MMT of cargo in Feb’24), we expect APSEZ to surpass even its revised cargo volume guidance of 400 MMT during FY24. The logistics business continues to do well, with YTD rail volume up 21% YoY in FY24. APSEZ has an extensive pan-India presence, strong pricing power and a high proportion of sticky cargo (>50%). With robust volume driven by consistent markets share gains, APSEZ recorded its strongest 9M performance in FY24, with the highest-ever revenue, EBITDA, and cargo volumes till date. APSEZ is continuously investing in building infrastructure for its logistics business, which is expected to improve long-term cash flows and earnings for the company.

Outlook

We increase our volume estimates by 2-3% for FY24-26. Over FY24-26, we expect APSEZ to register 10% volume growth and a CAGR of 15%/16%/18% in revenue/EBITDA/PAT. With consistent outperformance in cargo volumes, we increase the target multiple to 17x EV/EBITDA (earlier 16x) and reiterate our BUY rating with a revised TP of INR1,600.