Adani Ports share price gains as analysts maintain bullish stance after Q2 results

Adani Ports share price rose over a percent on Friday as analysts maintained their bullish stance on the stock after the Adani Group ports operator reported decent earnings growth in the second quarter of FY24.

Adani Ports and Special Economic Zone (APSEZ) reported a rise of 4.2% in its Q2FY24 net profit at ₹1,747.8 crore, compared to ₹1,677.5 crore in the corresponding period last year.

The port major's revenue from operations in the quarter ended September 2023 stood at ₹6,646.6 crore, registering a growth of 27.6%, compared to ₹5,210.8 crore in the year-ago period.

Also Read: Adani Ports Q2 Results: Net profit rises 4.2% to ₹1,748 crore, revenue up 27% YoY

On the operating front, Adani Ports' earnings before interest, taxes, depreciation, and amortization (EBITDA) during the quarter increased 35% to ₹4,053.9 crore from ₹3,005.5 crore, while EBITDA margins improved to 61% from 57.7%, YoY.

Brokerages maintained their bullish view on Adani Ports stock on the back of better operational performance, with some analysts raising target prices and earnings estimates. Here’s what brokerages said on AdanI Ports Q2 results and Adani Ports shares:

Kotak Institutional Equities

Kotak Institutional Equities said Adani Ports & SEZ is its top pick among infrastructure assets.

“Operating metrics are tracking ahead on the guidance and leverage continues to decline. We are also enthused by a cleaner balance sheet, with the return of security deposits and absence of any meaningful lending/return of ICDs,” said the brokerage firm.

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It increased its estimates by 5% on higher port EBITDA margin in the Mundra, Krishnapatnam and Kattupali ports. It continues to discount cash flows of Adani Ports at a high 11.8% WACC or 13.5% cost of equity and thus, considers good value in the stock at CMP.

The brokerage retained its ‘Buy’ rating on the stock and raised the target price to ₹940 per share from ₹870 earlier.

Nuvama Institutional Equities

Adani Ports reported a decent Q2FY24 with stable operational numbers; PAT, however, was marred by a MAT credit write-off. H1 cargo volumes at 203 MMT were robust, led by broad-based growth across dry, liquid and container cargoes. Net debt-to-EBITDA improved to 2.8x from 3.1x in Mar-23. The logistics business turned in an improvement in utilisation despite rapid capacity expansion. Overall results were decent and operationally in-line, said Nuvama Institutional Equities. 

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It believes Adani Ports’ strategy to expand current facilities and diversify should aid growth with moderate capex. The logistics business is sustaining rapid growth and has synergies with the port business. 

The brokerage retained a ‘Buy’ call on the stock with a DCF-based target price of ₹958 per share.

Motilal Oswal Financial Services

The brokerage house said Adani Ports’ market leadership in the ports segment and focus on delivering integrated logistics solutions places the company in a sweet spot. The operational ramp-up at recently acquired ports is expected to drive a 13% growth in cargo volumes over FY23-25. 

This would drive a revenue, EBITDA and PAT CAGR of 20%, 17% and 12% over FY23-25, it said. 

With improved outlook in the ports and logistics business, Motilal Oswal raised its EBITDA estimate for FY24 and FY25 by 10% and 3%. It reiterated its ‘Buy’ rating with a revised target price of ₹1,050 per share.

At 11:25 am, Adani Ports shares were trading 1.00% higher at ₹814.30 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.