Shares of Billionaire Gautam Adani-led Adani Group of continued to deliver robust returns to investors in Samvat 2078. If one goes by what analysts say, some of the group stocks have more steam left.
With a rally of 216 per cent, Adani Power emerged as the top gainer. Shares of this company jumped to Rs 332.65 on October 21 from Rs 105.35 on last Diwali (November 4, 2021).
Two other Adani stocks Adani Total Gas and Adani Enterprises rallied 128 per cent and 121 per cent, respectively, during the same period. Adani Wilmar, which made its debut on bourses in February this year, also surged nearly 197 per cent to Rs 682 against its issue price of Rs 230.
Since Diwali 2021, other group companies including Adani Transmission, Adani Green Energy and Adani Ports gained 79 per cent, 76 per cent and 12 per cent, respectively. This is against a 1 per cent decline in the BSE Sensex during the same period.
Market watchers are bullish on select Adani stocks for the next 12 months, as they cited favourable environment for the group companies.
Sharing his view on Adani Group, Kranthi Bathini, Equity Strategist at WealthMills Securities said, “Adani Group of stocks are looking strong despite high valuations. There is clear visibility of their earnings going ahead. Every dip in Adani group of stocks is an opportunity for investors.”
Valuations
At present, the price-to-earnings (P/E) ratio for Adani Total Gas stands at 712 times; and for Adani Enterprises and Adani Wilmar at 416 times and 111 times, respectively.
Commenting on valuations, Vinit Bolinjkar, Head of Research, Ventura Securities said, “People don’t understand valuations, as they look for P/E only. One should do DCF calculation because these businesses are long-term cash flow businesses. These companies are in a continuous capex-oriented cycle. So, this is what is being missed by the market. The ongoing growth trend will sustain.”
Bathini said the macro environment is improving in India. “The Adani group will get the advantage. The infrastructure businesses in which Adanis are operating are all in an up cycle right now. All these macro and micro factors are helping the group stocks,” he said.
Financials
For the quarter that ended June 30, the consolidated profit of all listed Adani Group firms jumped 155 per cent year-on-year (YoY) to Rs 6,897.85 crore. The figure stood at Rs 2,705.84 crore in the same quarter last year. On the other hand, cumulative sales of the group firms also increased by 102 per cent to Rs 79,769.97 crore during the quarter under review.
Among the top performers, Adani Power reported 1618 per cent growth in the bottom line in June quarter on a 109 per cent rise in net sales. The net profit of Adani Enterprises and Adani Wilmar rose 109 per cent and 19 per cent, respectively, during the same period.
Net profit of Adani Transmission, Adani Ports, Adani Green Energy and Adani Total Gas declined 61 per cent, 22.60 per cent, 0.90 per cent and 0.40 per cent, respectively, on YoY basis. Financial results for the quarter ended September 30 are yet to be announced.
Bolinjkar said debt is not an issue for the group, as all the businesses have got very long-term cash flows. “They are trying to get as much of their debt paper long-dated as possible. So, the cash flow can match payments that they will have to make in the future.”
Data available with Ace Equity showed that Adani Group had a total consolidated debt of Rs 2.2 lakh crore as of March 31, 2022.
Stocks to buy
“Adani Ports has huge value. It was followed by Adani Green where I feel fundamentals will play out. We also like Adani Enterprises,” said Bolinjkar.
Meanwhile, the Adani group in September completed the acquisition of major Indian cement players, Ambuja Cements and ACC. It has now become the second-largest cement player in the country.
In an earlier interaction with Business Today, Bolinjkar said, “Investors can consider Ambuja Cements for the next one year. With Adani’s entry and the government’s thrust on infra, Ambuja looks good. Also, the green hydrogen from Adani Enterprise can be used for producing green cement in the future which will be priced at a premium to the normal cement.”
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