Brokerages Expect Up To 16% Upside In Adani Stock Trading Below Rs 800 After Q1 Profit Jumps 83% YoY

Adani Group-backed integrated ports and logistics company, Adani Ports reacted positively to its Q1 earnings which surpassed Street's expectations. The stock is trading near Rs 800 per share, and brokerages are optimistic about the company's future growth and hence recommended buying. Adani Ports shares are factored to rise to 16% on BSE.

At the time of writing, Adani Ports shares traded at Rs 790.10 apiece up by Rs 0.73%, after hitting an intraday high of Rs 806.40 apiece in early deals on BSE.

The market cap of the company is nearly Rs 1.71 lakh crore.

On Tuesday, the company delivered its Q1 numbers after market hours. In the quarter, the company posted a consolidated net profit of Rs 2,115 crore, up by 83% YoY, while revenue from operations stood at Rs 6,248 crore rising by 24% YoY. EBITDA also saw double-digit growth of 80% YoY.

Karan Adani, CEO and Whole Time Director of Adani Ports and Special Economic Zone said, "APSEZ delivered its strongest ever quarterly operating performance during Q1 FY24, with highest ever quarterly cargo volumes, revenue, EBITDA and around 200bps jump in domestic market share, despite over 50% of the company's total port capacity being adversely impacted for around 6 days due to the cyclone Biparjoy."

For FY24 guidance, Adani Ports expect cargo volumes to be at 370-390 MMT resulting in a revenue of Rs 24,000-25,000 crore and EBITDA of Rs 14,500-15,000 crore. Total capex during the year is expected to be Rs 4,000-4,500 crore.

Should you buy Adani Ports share price?

Brokerages have raised their target price for Adani Ports shares.

According to Kotak Institutional Equities, Adani Ports reported a broadly in-line port EBITDA and volume print, both up 11% yoy in a quarter that was hit by externalities. With a flurry of assets close to being commissioned in ports and logistics, growth should accelerate from here on. ADSEZ's improving balance sheet may give it a good shot at Concor's privatization in FY2025.

Further, Kotak highlighted that the company's improved market share to 26% in 1Q from 24% in FY2023 on the back of a healthy 12% yoy volume growth. Half of the 12% volume growth was driven by the addition of new assets in Karaikal and Haifa. The adjusted organic growth print of ~5% could have been higher at 7% if not for the impact of the cyclone on the West Coast. The non-Mundra volumes grew 11%/17% yoy on an organic/overall basis, while Mundra volumes declined 2% yoy.

It further added, "On the target of 1000 mn ton volumes by FY2030, ADSEZ expects the share of overseas to be limited to 10-15%. Essentially, it is relying on the privatization opportunity in India in the next few years and the renewal of port concessions over FY2028-30."

Hence, Kotak's note said, "We increase EBITDA estimates by 3-4%. Roll-forward yields a revised FV of Rs870. The stock trades at a reasonable 12.5X one-year forward EV/EBITDA. BUY."

In its research note, JM Financial said, "We broadly maintain our FY24/25 estimates and introduce FY26 estimates. We maintain a BUY rating with a SoTP-based Jun'24 TP of INR 920 (earlier Mar'24 TP of INR 850). We value operational ports on a DCF basis given the specific concession of the ports. We follow FCFF methodology assuming a WACC of 11.8% with the cost of debt at 10% and the cost of equity at 14.1%. We maintain BUY."

Taking into consideration the target prices, Adani Ports shares have potential for an upside of 10% to 16.5%.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.