Domestic brokerage ICICIdirect has two Adani group stocks namely Adani Ports & SEZ (Adani Ports) and Ambuja Cements among its top March picks. Its target of Rs 500 on Ambuja Cements suggests a potential 35 per cent upside over Thursday's closing of Rs 370.85. For Adani Ports, the target of Rs 800 suggests a potential upside of 28 per cent over Thursday's closing price of Rs 623.20.
Adani Ports
ICICIdirect said Adani Ports Ltd is the largest commercial port operator in India with 25 per cent share of port cargo movement. Adani Ports, ICICIdirect said, has embarked on becoming India's largest integrated transport utility company by 2030 and is strengthening its capabilities in all logistics segments namely ports, CTO, warehousing, last mile delivery and ICDs. Adani Ports will be able to offer end to end service to its customers, capturing higher wallet share and also making the cargo sticky in nature.
Besides, the brokerage expects DFC connectivity to Mundra is expected to provide faster port evacuation, quicker transit time and would enable higher volume generation for Adani Ports.
"Adani Ports is backed by strong FCF generating assets (14 ports, 81 trains, 9 MMLPs, 1.4 million square feet warehousing, 620 kms of rail tracks etc) with a 15 per cent-plus RoCE. Further it has a comfortable debt to equity ratio close to 1. We have valued Adani Ports on SOTP basis with a target price of Rs 800," it said.
Ambuja Cements
On Ambuja Cements Ltd, ICICIdirect said Ambuja Cement is one of India’s largest cement player with capacity of 31.5 million tonnes spread across North (35 per cent), South (24 per cent), West (20 per cent) and East (21 per cent. It noted that the new management is planning to increase consolidated capacity (including ACC capacity of 36.1 million) to 140 million tonnes in next 5 years. ICICIdirect, however, noted that Ambuja Cements has lost its market share to other large players over the past five years, with no major new capacities coming in place during the period.
"With the aggressive new promoter, we now expect volume growth to get ramped up, going ahead. Also, the group’s exposure into energy and logistics will help them to improve cost dynamics and gain supply chain efficiencies. Overall, as per our rough estimates, we expect cost savings of Rs 300-350 per tonne from the current run rate. Company continues to have a strong balance sheet having debt free status," it noted.
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