Which Adani Group stock should you buy after Q1 results? Here’s what analysts suggest

Billionaire Gautam Adani-led Adani Group reported impressive growth in operating profit and net profit for the quarter ended June 30. Data showed that the combined bottom line of the group companies jumped over 69.71 per cent year-on-year (YoY) to Rs 12,116 crore in Q1FY24 against Rs 7,139.55 crore in the same quarter a year ago. On the other hand, operating profit grew 44.46 per cent YoY to Rs 21,800 crore during the same period. These numbers do not include figures of recently acquired ACC, Ambuja Cements and NDTV.

Considering the recently announced Q1 results, market watchers are bullish on select Adani stocks. However, they think that the upcoming report on Adani Group by the market regulator Sebi is crucial for stocks going ahead.

While sharing his view on the Adani group, Ambareesh Baliga, a Mumbai-based independent market analyst, said, “Most of the group companies reported good numbers in the June quarter. However, there have been exceptions like Adani Wilmar. The group seems to have put the Hindenburg report behind them with the overall performance. But despite these numbers, the stocks continue to be expensive from an investment perspective.”

“With some marquee institutions having invested in large quantum has boosted the sentiment in the group leading to liquidity flows. Stocks are back on traders’ radar. We need to closely monitor sustainable fundraising across the group to continue with huge expansion plans they had, till it was punctured by the Hindenburg report,” Baliga said.

Shares of the group companies have rallied up to 143 per cent from their respective 52-week low levels, scaled after the Hindenburg report earlier this year.

Company-wise, Adani Power outpaced other group firms in terms of profit growth. The company reported an 83.26 per cent YoY jump in net profit at Rs 8,759.42 crore in Q1FY24. It was followed by Adani Ports and Special Economic Zone (up 82.57 per cent YoY to Rs 2,114.72 crore) and Adani Green Energy (up 50.47 per cent to Rs 322 crore).

“Adani Ports is the leading player in the sector and sustainable growth which is visible in the sector for the next decade and more, making this stock interesting. However, on the valuation front, one needs to be cautious at current levels, since an entry is suggested only around Rs 650 levels,” Baliga said. Shares of Adani Ports closed at Rs 784.35 on August 8, down 0.92 per cent against the previous close.

Adani Enterprises and Adani Total Gas also posted a 43.55 per cent and 8.56 per cent YoY rise in net profit during the quarter under review. The consolidated bottom line of Adani Energy Solutions (formerly known as Adani Transmission) declined 5.88 per cent YoY to Rs 175.06 crore. On the other hand, Adani Wilmar posted a loss of Rs 78.92 crore against a profit of Rs 193.59 crore in the same quarter last year.

Baliga further added that Adani Wilmar is another stock on his radar. “Though the weak set of earnings is keeping speculative interest away, the entity seems a misfit in the overall group positioning. It could be a divestment candidate for the group which could provide upside for the investors,” the market veteran said.

A report by Bloomberg on August 8 quoting sources said that Adani Enterprises has been considering a potential sale of its 44 per cent stake in Adani Wilmar, its joint venture with Wilmar. This may fetch the group $2.7 billion (over Rs 20,000 crore).

Net profit of recently acquired cement majors ACC and Ambuja Cements surged 105 per cent and 20.43 per cent YoY to Rs 466.10 crore and 905.61 crore, respectively, during the April-June period. On the other hand, NDTV posted a loss of Rs 8.13 crore against a profit of Rs 23.23 crore during the same period.

Of late, ICICI Securities upgraded Ambuja Cements to ‘Add’ from ‘Hold’ after the cement major announced the acquisition of Sanghi Industries (SIL) at Rs 5,000 crore. “With a 14mpta expansion plan already in works, the capacity boost of 15mtpa from SIL to improve efficiency further, Ambuja Cements seems to be on a roll. We now value Ambuja Cements at 17x FY25E EV/EBITDA (against 15x earlier). Factoring the efficiency improvement in Q1FY24 and the indication by the management of capacity expansion going ahead, we now value subsidiary ACC at 12.5x (against 11x earlier). While we maintain ‘Add’ on ACC, our target price stands revised to Rs 2,338 (earlier Rs 2,084 earlier). Our revised target price for Ambuja Cements stands at 512 (Rs 443 earlier),” ICICI Securities said in a report.

Kranthi Bathini, Equity Strategist, WealthMills Securities said, “Select Adani group firms have shown traction in terms of the revenue and profit growth in Q1FY24. The latest shareholding data highlighted that the institutional and retail confidence are coming back with respect to the Adani Group. Investors can add Adani Enterprises on every dip for the long term. We are also positive on Ambuja Cements and Adani Energy Solutions.” He further added that the upcoming Sebi report on the Adani Group will further decide the direction of the group’s stocks.

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