Adani group stock: 4 reasons why Adani Ports shares rallied 51% in 3 days

Shares of Adani Ports & SEZ have jumped 46 per cent from a 52-week low of Rs 394.95 hit on Friday to a high of Rs 596.75 in Tuesday's trade. Adani Ports is expected to report a decent set of quarterly results later today. The company is among three Adani group companies, which prepaid loans and released pledged shares. The Adani group stock, which is tracked by analysts, looks attractive post recent correction, said many brokerages including Credit Suisse. Add to that was company's recent January business update, which was healthy. Meanwhile, there were a recent media report that suggested the company could announce a share buyback, but the company later clarified that there were no such plan. 

Prepayment, release of pledged shares

Adani group's flagship Adani Enterprises said its promoters will prepay loans against pledged shares to the tune of $1,114 million. With the repayment, Adani Enterprises said it would release 27.56 million Adani Green Energy shares, representing 3 per cent of promoters' holding.

"In light of recent market volatility and in continuation of the promoters’ commitment to reduce the overall promoter leverage backed by Adani Listed Company shares, we are pleased to inform that promoters have posted the amounts to prepay $1,114 million ahead of its maturity of Sep 2024," said the conglomerate's spokesperson in a statement.

Q3 profit growth likely in double digit

PhillipCapital expects Adani Ports to clock a 12.4 per cent year-on-year (YoY) jump in net profit at Rs 1,661.90 crore for the December quarter against Rs 1,478.80 crore in the same quarter last year. Revenue is seen surging 29.80 per cent YoY to Rs 4,930.10 crore against Rs 3,797.10 crore in the corresponding quarter last year. Ebitda is seen rising 24.4 per cent YoY to Rs 3,022.60 crore from Rs 2,430.60 crore. Ebitda margin is expected to drop to 61.3 per cent in December quarter from 62.6 per cent in September and 64 per cent in the year-ago quarter. PhillipCapital expects container volumes to stay subdued. It anticipates lower volumes and higher operating cost. The brokerage has assumed effective tax rate of 17 per cent in December quarter against 9 per cent in September quarter.

Attractive valuations

Amid crash in Adani Ports shares in the wake of Hindenburg report, Credit Suisse upgraded Adani Ports to Outperform from Neutral, citing attractive valuations. Strong underlying business with growth prove downside support, the brokerage said on January 31. B&K Securities on February 6 said its short liability analysis of Adani Ports reveals no major stress for the company.

"We maintain our Buy rating on the stock with an unchanged target price of Rs 920, implying 40 per cent upside from current levels. The stock is currently trading at FY24F PE of 17 times which is at the lower end of historical range of 17-24 times. We value the Ports business at an EV/Ebitda  of 15 times, while other businesses at an EV/Ebitda of 12 times to 14 times," it said.

January business update

The company in a business update said Adani Ports handled 27.6 million metric tonnes of total cargo , implying a YoY growth of 11 per cent. During April 2022-January 2023, Adani Ports clocked 280.5 mmt of cargo volumes, which is a good 8 per cent YoY growth, the company said in a BSE filing on February 3. 

Earlier, the stock was in news amid a media report that suggested the Adani group could announce a share buyback for Adani Ports and another group firm Ambuja Cements, but the company later denied such report. 
 

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