Q2 Results: Here’s What Analysts Have To Say About Adani Ports’ Performance

Adani Ports and Special Economic Zone Ltd.’s debt increased in the quarter ended September and it lowered volume growth guidance amid a tepid macro environment. Yet, most analysts hiked target price on the port operator and maintained their bullish investment stance.

It cut volume growth guidance for the ongoing financial year to 8-10 percent from 10-12 percent earlier. Despite generating free cash flows during the quarter, Adani Ports’ debt increased on account of restatement of foreign debt and additional debt taken by the company for acquisitions.

The company’s net profit, however, beat analysts’ estimates during the period, aided by higher other income, lower foreign exchange losses and tax gains. Even the company’s operational performance was as expected.

Here’s what analysts have to say about Adani Ports’ second-quarter performance…

JPMorgan

• Maintains ‘Overweight’ and hikes target price to Rs 465 from Rs 458 apiece.
• Cargo volume growth was tepid.
• Expects 9 percent cargo volume growth, 11 percent revenue growth and 69.6 percent Ebitda margins in the second half.

Macquarie

• Maintains ‘Outperform’ and hikes target price to Rs 496 from Rs 470 apiece.
• Tepid volume growth did not surprise given macro environment.
• Incremental capacities may not move the needle.
• Balance sheet is strong enough to fund expansion.

Nomura

• Maintains ‘Neutral’ but hikes target price to Rs 430 from Rs 415 apiece.
• Results miss on adverse mix and forex loss.
• Slowing EXIM trade hurt margins.
• Cuts FY20/21 Ebitda estimates by 5 percent/4 percent to factor in weak environment.

HSBC

• Maintains ‘Buy’ with a target price of Rs 450 apiece.
• Port Ebitda growth slowed; container volumes remained solid.
• Diversification of cargo to drive 8-10 percent volume growth and 12-14 percent revenue and Ebitda growth in FY20.
• Lower FY20-22 Ebitda and profit slightly on lower estimated volumes.

Citi

• Maintains ‘Neutral’ but hikes target price to Rs 417 from Rs 416 apiece.
• Weak second quarter; net debt increases.
• Other acquisitions on the anvil.
• Company would maintain investment grade rating.

Kotak Securities

• Maintains ‘Buy’ but cuts target price to Rs 450 from Rs 460 apiece.
• Weak bulk volumes partly on one-offs; masks outperformance in container and diversification.
• Adds debt despite growing free cash flow generation; preparing for potential acquisition.
• On the lookout for assets to fill missing voids in port portfolio and pan-India logistics business.

Antique Broking

• Maintains ‘Buy’ but cuts target price to Rs 445 from Rs 450 apiece.
• Tepid volume growth in line with tough operating environment.
• Recent acquisitions boosted performance for Adani Logistics in second quarter.
• Dhamra Port—growth story to continue; management maintains strategy on expansion/capex.