Brokerage Raises Target On Adani Ports, Sees Around 17% Upside

Adani Ports is one of the best-performing Adani Group stocks. Since the start of the year, the Adani Ports’ share price has gone up over 34%. Analysts at Kotak Securities see the rally continuing.

The Adani Ports Analyst: Aditya Mongia-led analyst team at Kotak Securities maintained the “buy” rating for the stock raising the target price to ₹1,650 from ₹1,550. The revised target indicates an around 17% upside from the stock’s last closing price of ₹1,404.45.

The Adani Ports Thesis: The brokerage said that Adani Ports continues to outperform in FY24 to date, despite a weak market start. This trend is expected to persist due to anticipated margin improvements. The analyst also highlighted that the ports major hold a substantial capacity bank, around 5-6 times its current capacity, giving it an edge over peers who face higher capital costs to double their capacity.

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The brokerage pointed out that in April-May 2024, the Adani Group company saw a 14% year-on-year volume growth, outperforming the Indian market's low-to-mid single-digit growth. This includes volumes from Gangavaram Port, which faced a loss due to strikes.

New assets like Gopalpur, Dar es Salaam, Vizhinjam, and Colombo contributed to higher yoy comparisons, suggesting high teen exit growth rates for FY2025. The analysts think that this may lead to upgrades to the current low double-digit growth guidance.

In the long-term analysts at Kotak Securities said that based on their conversation with the management the Adani Ports’ could grow 5-6 times. The brokerage also added that this expansion would be cost-effective compared to peers because most competitors have assets where scaling up capacity is challenging due to fixed-capacity terminals.

Sustained outperformance and margin improvement are expected as competitors will need to add assets, increasing their capital costs. Over the past decade, the ports giant has acquired most non-major ports from private players at reasonable valuations, enabling large capacity additions.

Price Action: Adani Ports’ share price was up 0.33% to trade at ₹1,409.10 in early trade on Friday.

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