This Adani Group stock's target price raised by Jefferies. Key triggers
1 min read 14 Sep 2022, 10:02 AM ISTJefferies has maintained its Buy rating on the Adani Group stock with a target price of ₹1,100 per share
PremiumGlobal brokerage Jefferies in a note said that it interacted with Adani Ports' management to discuss business operations. Adani Ports aims to leverage its strong B/S to benefit from gradual volume recovery, as global container rates are easing and as it grows in logistics/warehousing to offer customers end-to-end solutions, the brokerage highlighted.
“We raise our FY23-25E volumes by 3-7% to factor in 1QFY23 and EPS by 5-11%. Medium-term double-digit growth should continue as it replicates the Mundra market share gain story at its acquired ports," the note stated. The brokerage house has maintained its Buy rating on the Adani Group stock with a target price of ₹1,100 per share (from ₹850).
India’s logistics cost is 14% of GDP vs just 8% in US. Indirect logistics costs of USD174 bn (6% of GDP) are a big component and point to systemic inefficiencies. Adani Ports is a market leader in ports in India, and, if it can support this with warehousing/inland logistics, it would only add to its USP and market share gains, as there is no similar company in India that provides these integrated services at a large scale, it highlighted.
"We hosted Adani Group CFO, Jugeshinder Singh, at our Sept. 2022 Jefferies Asia Forum. He highlighted that profitability is a focus even in international investments. Adani Ports management also pointed out that they are entering global markets with strategic partners so that risk is mitigated, and they have better color on the country’s landscape to grow port operations. Their key global projects include Israel Port ( ₹85 bn capex, 70% stake) and Sri Lanka Port ( ₹53 bn capex, 51% stake)," Jefferies added.
Operationally, Adani Ports is continuing to move from strength to strength, with market share moving up to 22% from 14% in FY15 and expected to be 31% by FY25E. As core port EBITDA growth remains upward of double digits, backed by volumes, Jefferies remains positive on Adani Ports shares. Though, downside risks, as per the brokerage, include incremental negative news flow on group leverage and disappointing market share gain at acquired ports.
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