Shares of Adani Ports and Special Economic Zone Ltd (Adani Ports) extended their gains on Friday to hit new lifetime highs. The multibagger stock from Adani Group is among the preferred picks of Kotak Institutional Equities (KIE), which sees more upside in the stock in coming days.
Kotak took stock of recent developments that bode well for Adani Ports. The market is set to grow 8 per cent for the second consecutive year, it is having a majority share in growth volumes in FYTD24 organically, prospects of adding Gopalpur and compete with the last of the key major ports in Vizag and the group’s improving financial health, said Kotak. Adani Ports has strengthened its portfolio through acquisitions, particularly on the east coast. Potential addition of Gopalpur would further add to its positioning, as it would enable competing in the hinterland around the Vizag Port, the only remaining key major port where Adani Ports is not present, Kotak said. Earlier this week, Adani Ports announced that the company, has elevated CEO Karan Adani, the CEO of the company, has been elevated to the role of Managing Director of the company, replacing his father Gautam Adani. Adani Ports is India’s largest ports and logistics service provider. Shares of Adani Ports rose more than 2.75 per cent to Rs 1,154, its new record highs, commanding a total market capitalization of close to Rs 2.50 lakh crore. The scrip had previously settled at Rs 1123.35 on Thursday. The stock has surged about 193 per cent from its 52-week lows at Rs 394.95 hit about 11 months, following Hindenburg's report. Adani Ports' December 2023 volume rose 38 per cent year-on-year (YoY), said InCred Equities. "Ex Haifa, we estimate APSEZ’s volume at 35mt, ahead of its FY24F guidance of 370-390mt," ii added. Gross debt has flattened out over 1HFY24, while TTM EBITDA has grown more than 20 per cent. Our assessment of pledged levels suggests insignificant pledging levels at 3 per cent of overall shareholding, the brokerage added. "We increase port EBITDA estimates by 5 per cent due to strong 3QFY24 performance on volumes and higher contribution from new asset wins," it said. "We increase the fair value to Rs1,340 (from Rs1,060) on 5 per cent higher near-term EBITDA estimates, higher LT growth estimate, higher terminal growth rate, 25 bps lower WACC and roll-forward. Our DCF-based fair value implies 14 times one-year forward EV/EBITDA versus the historical range of 10-16 times," Kotak added with a buy rating and suggesting an upside of 19 per cent. Also, Adani Ports is reported to raise Rs 500 crore via issuance of non-convertible debentures, which may open on Monday, January 8. One of the bond issuances will have a term of five years and a fixed coupon of 8.7 per cent, while the other bond issuance will have a term of ten years and a fixed coupon of 8.8 per cent. The face value of each security is Rs 1 lakh.
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