Adani Ports Shares Fall On Q4 Earnings Miss; Analysts Stay Bullish

Analysts retained their bullish investment recommendations on Adani Ports & Special Economic Zone Ltd. even as the nation’s largest port operator missed estimates in the fourth quarter.

“4QFY21 Ebitda is 17% below expectations, given lower margins but should recover as volumes rise,” Jefferies India said in a post-earnings note on Wednesday. Antique Stock Broking agreed.

Billionaire Gautam Adani’s ports and SEZ empire on Tuesday reported a fourfold jump in profit over the year earlier at Rs 1,287 crore, and 39% increase in operating income at Rs 2,287 crore. But they missed the consensus forecasts of analysts tracked by Bloomberg.

According to Jefferies, Adani Ports’ stock can be rerated from current levels if:

• Market share rises from 21% to 32% with recent acquisitions by FY25E;

• Return on equity is back at 20% with asset-sweating.

• Further drop in promoter pledges.

Shares of Adani Ports dropped as much as 4.69%—the worst since April 19, 2021—around 2 p.m. on Wednesday. Of the 26 analysts tracking the company, 21 have a ‘buy’ rating, two recommend a ‘hold’ and three suggest a ‘sell’, according to Bloomberg data. The average of 12-month consensus return potential implies an upside of 11.4%.

Here’s what brokerages have to say about Adani Ports’ fourth-quarter results..

Antique

• Maintains ‘buy’ with a target price of Rs 865 apiece.

• Q4 performance marginally below expectations with Ebitda (ex-forex) growing 39% YoY to Rs 2,290 crore.

• Volume guidance factors in uncertainty related to Covid-19 second wave, impact of which is visible in April 2021.

Elara Capital

• Maintains ‘buy’ with a target price of Rs 868 apiece.

• Q4 performance was exactly as estimated, with revenue growth of 24% YoY.

• Krishnapatnam and Gangavaram ports acquisition strategic to up the throughput to 500 MMT by 2025.

• Expects 309 MMT volumes in FY22.

Jefferies

• Maintains ‘buy’ with a target price of Rs 767.25 apiece.

• Adani Ports is a good blend of geographical and cargo diversification.

• Rise in promoter pledges and disappointing margin continues to remain as risks.

Citi

• Maintains ‘buy’ with a target price of Rs 767.15 apiece.

• Business mix and reach continues to extend beyond port business to adjacent business of logistics and warehousing.

• Cash flows remain strong.

• Company strengthens its pole position.

• Well placed to compete for Concor acquisition if the government decides to go ahead.