Ajit Karn
Kotak Institutional Equities has raised its rating on Adani Ports NSE -16.29% and Special Economic Zone from “add” to “buy,” citing attractive values and a strong and resilient play on the lucrative ports business as the reasons for the change.
As a result of the recent drop in stock prices, Adani Ports is currently selling at 10 times the enterprise value-to-operating profit (EV/EBITDA) forecast for FY25, which is significantly lower than the previous range of 10-16 times.
The brokerage provided a 1-year ahead trading range as an example.
Adani Ports is present in the majority of the stages of the value chain for logistics and is getting a larger portion of the market in the rail transportation industry.
Container Corp. of India (CCRI) presently has a market share of approximately 38% at Mundra port, down from 52% over the course of the previous four years.
Given its expansion goals in logistics, neighbouring port operations, huge balance sheet, and benign leverage, Adani Ports is also a strong contender for the acquisition of the government’s share in Container Corp.
Karaikal Port was added to Adani Ports’ portfolio when the Supreme Court gave the green light for the company to compete for major port construction contracts. In addition, Adani Ports acquired a few assets in the cities of Haldia and Tajpur.
According to Kotak, an analysis of the National Monetization Pipeline reveals that there are ordering opportunities worth Rs 15,000 crore for private sector players in ports such as Adani Ports.
The brokerage estimates that the firm will bring in order wins totaling Rs 5,000 crore by FY25. Out of this total, the company has already brought in Rs 1,500 crore through the Haldia and Karaikal ports and plans to invest in the Karaikal port.
Kotak has reduced its port volume, revenue, and operational profit expectations for the current financial year as well as the next two financial years in response to macroeconomic headwinds and restrictions on EXIM trading for certain commodities. Despite this, the rating has been upgraded.
As a direct consequence of this development, the price target for the stock has been lowered from Rs 920 per share to Rs 860 per share.
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The rating increase and favourable outlook on the flagship company of the Adani Group failed to please Wall Street, as seen by the stock’s experiencing its largest single-day decline in over three years. On the NSE, the price of the stock plummeted by 25%, reaching a level that has not been seen in nearly 2 years.
Kotak Institutional Equities has upgraded its rating on #AdaniPorts and Special Economic Zone by one notch to “buy” from “add”, citing attractive valuations and a strong and resilient play on the remunerative ports businesshttps://t.co/pMFrbIPELC
— ETMarkets (@ETMarkets) January 27, 2023
The unfavourable analysis published by US-based Hindenburg Research, which raised concerns about corporate misgovernance, stock price manipulation, and high-leverage risks against the group, was the impetus for the sell-off of the company’s shares.
