Kotak Institutional Equities has upgraded its rating on
Adani Ports NSE -16.29 % and Special Economic Zone by one notch to “buy” from “add”, citing attractive valuations and a strong and resilient play on the remunerative ports business.
After the recent fall in stock prices, Adani Ports is trading at 10 times the enterprise value-to-operating profit (EV/EBITDA) estimate for FY25, compared to 10-16 times.
1-year forward trading range, said the brokerage.
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Adani Ports is present in most parts of the logistics value chain and is gaining market share in the rail transportation business.
Container Corp of India (CCRI) now has around 38% market share at Mundra port versus 52% in the past four years.
Adani Ports is also a keen contender for acquiring the government’s stake in Container Corp, given its growth ambitions in logistics, adjacent ports offerings, and large balance sheet and benign leverage.
After the Supreme Court cleared the deck for the company to bid for major port projects, Adani Ports has added a few assets in Haldia and Tajpur and has also added Karaikal Port.
A look at the National Monetization Pipeline suggests Rs 15,000 crore of ordering prospects for private sector players in ports such as Adani Ports, believes Kotak.
The brokerage assumes Rs 5,000 crore of order wins for the company by FY25, of which it has won Rs1,500 crore through Haldia and Karaikal ports and will invest in the Karaikal port.
While it upgraded the rating, Kotak has trimmed its port volume, revenue, and operating profit estimates for the current and the next 2 financial years amid macro headwinds and curbs on EXIM trade for select commodities.
As a result, the price target for the stock stands reduced to Rs 860 a share from Rs 920 a share earlier.
The rating upgrade and positive outlook on the Adani Group’s flagship did little to impress the Street, as the stock saw its biggest single-day drop in nearly 3 years. The stock nosedived 25% to hit a nearly 2-year low of Rs 537 on the NSE.
The sell-off was triggered by the negative report of US-based Hindenburg Research, which raised corporate misgovernance, stock price manipulation, and high-leverage risks against the group.
Adani Ports Share Price– 604.50 INR
Adani Ports Share– Adani Ports and Special Economic Zone Ltd.
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