Buy Adani Ports shares, earning upgrades likely on D-St post Q3 results; stock target Rs 1,415: Nuvama

Adani Ports reported its highest-ever cargo volumes of 311 mmt for the nine months ended December 31, and revised up its guidance to 400 mmt for FY24 against the earlier guidance of 370–390 mmt).

Adani Ports & Special Economic Zone Ltd (Adani Ports) could see earnings upgrades post Q3 results, says Nuvama Institutional Equites, which has upped its target on the Adani group stock to Rs 1,415 from Rs 958. The domestic brokerage said the FY24 guidance upgrade suggested the growth momentum is accelerating and, thus, it upped FY24 and FY25 earnings estimates for Adani Ports by 13 per cent and 18 per cent, respectively.

The Gautam Adani-led company had on Thursday clocked a 67.87 per cent year-on-year (YoY) rise in net profit at Rs 2,208.41 crore for the December quarter on a 44.58 per cent rise in sales at Rs 6,920.10 crore. Ebitda for the Adani firm was up 59 per cent YoY at Rs 4,293 crore.

Nuvama said Adani Ports reported its highest-ever cargo volumes of 311 mmt for the nine months ended December 31, and revised up its guidance to 400 mmt for FY24 against the earlier guidance of 370–390 mmt). Adani Ports also achieved its highest ever rail (22 per cent) and GPWIS (46 per cent) volumes in 9MFY24. Net debt-to-Ebitda stood at 2.5 times (targeted level) versus 3.1 times at end-FY23.

“APSEZ has also completed the sale of Myanmar assets and the acquisition of Karaikal Port. The company is mitigating the concentration risk with non-Mundra volumes contributing 46 per cent in 9MFY24 (versus 44 per cent YoY). APSEZ also indicated that so far it has not faced any volume disruption for its Haifa port in the backdrop of the geopolitical conflict thereof,” Nuvama said.

The domestic brokerage said Nuvama incurred capex of Rs 5,500 crore over 9MFY24 and expects a total capex outflow of Rs 7,000–7,500 crore for FY24. With robust growth and prudent spending on capex, it expects the returns ratios and debt metrics to improve over the next couple of years.

“Improving net leverage levels should also spur earnings. Growth has been visible across ports with healthy volumes driving growth. APSEZ is focusing on reducing its net debt, and targets to sustain 2.5 times net debt-to-Ebitda levels in the future. Furthermore, on the logistics side, APSEZ plans to achieve warehousing capacity of 60 million sqft with an annual addition of 10 milion sqft. Acquisition on the port side along with multi-fold capacity creation in the logistic business should unleash multi-year growth prospects for APSEZ,” it said.

Nuvama noted that Adani Ports’ logistics business continued to outpace peers with a total of 10 MMLPs, and two more to come.

The operating profit growth was due to improved efficiencies and capacity utilization, while revenue growth was aided by an increase in cargo volumes.

Operationally, the company achieved its highest-ever quarterly cargo volume of 108.6 MMT. Mundra, its flagship port, recorded the highest-ever monthly volume at any Indian port on October 23.

Adani Ports achieved a key milestone of 300 MMT in 266 days vs 329 days in FY23. The overall cargo volume was 311 MMT in the nine months ended December, up 23% year-on-year.

Domestic cargo growth was over 2.5x India’s growth rate, with nine of the company’s domestic ports/terminals recording their highest-ever cargo volumes in the 9MFY24 period.

Quarterly rail volumes grew 17% YoY to 157,904 TEUs. The company said it recorded its highest-ever rail (+22%) and GPWIS (+46%) volumes in the nine months of FYF24.

“APSEZ recorded its strongest ever Q3 and 9M performance with the highest ever revenue, EBITDA, and cargo volumes, and is on course to overachieve its full-year guidance provided at the start of the year,” said Ashwani Gupta, CEO, Adani Ports.

Adani Ports completed a bond buy-back of $325 million concluded during the 9MFY24 period, leading to an improvement in net debt to EBITDA to 2.5x against 3.1x for FY23.

On Thursday, following the announcement of results, Adani Ports shares were trading 1.52% higher at Rs 1226 on NSE.

With Thanks Reference to: https://economictimes.indiatimes.com/markets/stocks/earnings/adani-ports-q3-results-net-profit-jumps-68-yoy-to-rs-2208-crore/articleshow/107318750.cms and https://economictimes.indiatimes.com/markets/stocks/earnings/adani-ports-q3-results-net-profit-jumps-68-yoy-to-rs-2208-crore/articleshow/107318750.cms