Shares of Adani Ports and Special Economic Zone Limited gained 1.5% in Friday's opening trade as a couple of top brokerages recommended 'Buy' rating on the counter and some even raised their price targets after APSEZ reported a decent second-quarter with stable operational numbers.

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At 10:08 am, the scrip was trading 0.83% higher at ₹812.90 apiece on the NSE. The Adani Ports stock has rallied 18% in the last six months.

Global brokerage firm Jefferies has maintained its 'Buy' rating on Adani Ports with an increased share price target of ₹985. CLSA finds the stock worth ₹878.

Jefferies has raised its FY24 to FY26 volume by 4% based on recently announced October 2023 volume run-rate. Additionally, it said the management is now confident of meeting the upper end of its FY24 9-15% year-on-year (YoY) volume growth guidance.

According to CLSA, Adani Ports' mergers and acquisitions (M&A) strategy has paid a rich dividend. The CEO is resolutely focused on its next leg of growth, saying, "Will bring down net debt-to-EBITDA to 2.5 times in FY24." The port operator's net debt-to-EBITDA improved to 2.8 times from 3.1 times in March 2023.

Adani Ports posted a revenue growth of 28% in the September quarter, beating analysts' estimates, even as profit was hurt by a MAT (Minimum Alternate Tax) credit write-off.

During the quarter, the port operator recorded a 17% year-on-year (YoY) growth in cargo volumes to reach 101.2 million metric tonnes (MMT) .

Adani Ports handled a total cargo volume of 37 MMT in October 2023, marking a strong 48% growth on a YoY basis.

APSEZ handled combined volumes of 240 MMT cargo in the seven months of the ongoing financial year 2024, while the recorded volume grew by approximately 15% on a YoY basis across the ports in India.

Both Mundra and non-Mundra port clocked strong growth across dry, liquid and container volumes. Overall volumes rose 28% YoY and 6% QoQ.

"With the completion of the Karaikal acquisition, the port is ramping up well, along with the newly acquired Haifa port, which managed 6.6 MMT in 1HFY24. The management continues to remain optimistic about achieving its higher end of FY24 cargo guidance," said Motilal Oswal Securities while suggesting a target of ₹1,050 on the stock.

With operational ramp up at ports acquired in the last few years, Motilal expects APSEZ to register a 13% volume growth over FY23 to FY25. This would drive a compounded revenue, EBITDA, PAT of 20%, 17%, and 12%, respectively, over the same period.

Operating profit, calculated as EBITDA, shot up 27% on-year but dipped 3% QoQ as margin came in at 58.4% in the September quarter. The margins were adversely impacted by higher operating expenses.

The first half of this financial year 2023-24 has been strong for Adani Ports, and with this run-rate, analysts at Nuvama Institutional Equities believe that FY24's operational metrics could overshoot management guidance.

Logistic footprint

The logistics business, Nuvama said, is sustaining rapid growth and has synergies with the port business.

"More importantly, the logistics business continues to outpace peers with a total of 10 MMLPs and two more to come during the year. With robust growth and prudent spending on capex, we expect the returns ratios and debt metrics to improve over the next couple of years," it said.

On the logistics side, Nuvama said that Adani Ports aspires to achieve warehousing capacity of 60 million square feet with an annual addition of 10 million square feet. "Inorganic acquisition on the port side along with multi-fold capacity creation in the logistic business should unleash multi-year growth prospects for APSEZ," the brokerage noted.

First Published:Nov 10, 2023 10:43 AM IST