Buy Adani Ports and Special Economic Zone; target of Rs 400: Dolat Capital

Dolat Capital's research report on Adani Ports and Special Economic Zone

Q1 results were higher than our estimates. Revenue declined ~18% YoY to Rs 22.9Bn led by 27% YoY fall in volumes. Port revenue fell 21%YoY/QoQ. Logistics segment grew by 11% account of additional rail capacity usage. Adjusting to Rs 800mn COVID-19 donation and FX gain of Rs 371mn, EBITDA stood at Rs 14.4Bn, down 22% YoY. Margin was 62.7%, versus 66% YoY/56.3% QoQ. APAT was Rs 8Bn, lower 21% YoY driven by lower tax and improvement in cost. The management highlighted: (1) Price hikes and contract realignment benefitted realization (2) July volumes are improving MoM basis and expects trend to continue (3) Mundra surpassed JNPT to become largest container handling port in India (4) Container share at 38%. We are positive about the long-term prospects given commissioning and ramping up of new ports, sourcing of new cargo, and market share gains. Improvement in the EXIM cargo with opening of economy will boost the volumes further.

Outlook

We remain positive on the stock with the BUY rating and revised our SOTP based target to Rs 400. We have raised FY21E/FY22E EPS by 10%/11% on the back of lower tax rate and improvement in realization.

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