Brokerages Remain Bullish On Adani Ports After Q3 Results
The Mundra port in Kutch district. (Photo: Adani Ports website)

Brokerages Remain Bullish On Adani Ports After Q3 Results

Analysts remained bullish on Adani Ports and Special Economic Zone Ltd. as volumes rebounded and on market share gains.

The nation’s largest port operator expects volumes to range between 225 MMT and 230 MMT for the ongoing fiscal, excluding those of Krishnapatnam Port. It expects volumes at Krishnapatnam to be 20 MMT during the second half of the ongoing financial year.

Adani Ports also reported a rise in net profit and revenue in the quarter ended December. The company has guided for free cash from operations to be around Rs 5,600 crore.

Still, shares of Adani Ports fell as much as 2% in early trade on Wednesday to Rs 570.6 apiece, and are down for the second straight day. Of the 27 analysts tracking the company, 25 recommend a ‘buy’ and two suggest a ‘hold’. The average of Bloomberg consensus 12-month price target implies an upside of 8%.

Also read: Adani Ports Q3 Results: Profit Rises 15%, Beats Estimates On Higher Cargo Volumes

Here’s what analysts have to say about Adani Ports’ third-quarter results...

CLSA

  • Maintains ‘buy’ rating with a price target of Rs 675 apiece
  • Ports deliver sector-leading growth but SEZ weak
  • Volumes rebound in third quarter with big market share gains
  • Addition of many large customers expected to improve visibility
  • Guidance raised on volume to the upper end
  • Trading at a 16-37% discount to peers such as Container Corp.
  • Remains best long-term infrastructure asset

Nomura

  • Downgrades to ‘neutral’ from ‘buy’; hikes price target to Rs 630 apiece from Rs 530
  • Volume outlook robust into FY22F and Covid-19 linked impact now behind
  • Raise Ebitda forecasts for FY22/23F by 8% and 9% respectively factoring in higher volume estimates
  • WDFC linkage can lead to further market share gains
  • Overall volume and pricing outlook appears favourable
  • Downgrade as a strong earnings outlook is likely factored in

Jefferies

  • Maintains ‘buy’ rating; hikes price target to Rs 670 apiece from Rs 630
  • Continued to gain market share, particularly in container volumes
  • Krishnapatnam Port acquisition fully accounted for in third quarter and led to some one-off integration expenses as well
  • Promoter pledges are now at 22% of their holding versus 45% in November 2020
  • Lowers FY21-22 EPS estimates by 3-7% but raises for FY23 by 2% to account for a more gradual margin improvement at Krishnapatnam
  • Management commitment to drop promoter pledges is a key rerating trigger

HSBC

  • Maintains ‘buy’ rating with a price target of Rs 660
  • Port Ebitda rose on volume recovery and further market share gains
  • Optimistic guidance for fourth quarter FY21 and beyond
  • Forecasts 12.6% volume growth in FY21 versus 14% previously
  • Sees port Ebitda CAGR of 22% over FY20-23
  • Sees Adani Ports as a long-term play on trade and infrastructure growth
  • Improving free cash flows and unwinding of promoter pledges should be positive catalysts
  • Key risks: Prolonged Covid-19 outbreak and rise in inter-group loans

Morgan Stanley

  • Maintains ‘overweight’ rating; raises price target to Rs 733 apiece from Rs 502
  • Continues to gain market share
  • Strong pricing power with assets at strategic locations
  • Delivers value to its customer base with strong mechanisation levels
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