Adani Port and Special Economic Zone (APSEZ) which reported a miss in the Q3 earnings on Tuesday, has seen a price cut from Kotak Institutional Equities (KIE) but the brokerage remains positive on the counter and pegs its fair value at Rs 810, which indicates a potential upside of 45 per cent in the stock from its previous close.
The company’s guidance for FY2024 suggests healthy low-teens/high-teens organic/overall YoY growth and a healthy quantum of deleveraging to 2.5X net debt to EBITDA, said Kotak, lowering its target price to Rs 810 from Rs 860.
APSEZ reported an expectedly weak 3Q volume print, with healthy realization growth driving 15 per cent and 13 per cent YoY growth in port revenues and EBITDA, respectively.
“We lower estimates and fair value by 5 per cent, as we factor in limited asset acquisitions in FY2024/25E and the weakness in the FY2023 print. Net of roll-forward, we factor in 14 per cent and 12 per cent CoE and WACC, respectively, but we set aside 200 bps of market cap per annum as a cushion against unforeseen events,” it said with a buy rating.
Adani Ports reported a 13 per cent year-on-year (YoY) decline in the profit after tax (PAT) at Rs 1,336.51 crore in the quarter ended on December 31, 2022. The company had reported a profit after tax at Rs 1,535 crore in the year ago period. The company reported a 15 per cent increase in EBITDA at Rs 3,011 crore in Q3FY23.
However, Adani Ports’ revenue from operations increased 18 per cent YoY to Rs 4,786.17 crore during October-December 2022 period which was Rs 4,071.98 crore in the same period previous year. ┬аIt managed 75.4 million metric tonnes (MMT) of cargo in the given quarter, a marginal rise of only a per cent.
Global brokerage firm Goldman Sachs has also maintained its buy rating on the stock with a target price of Rs 840. The brokerage said that the company has posted in-line results and the near-term focus is on deleveraging.
“FY24 EBITDA guidance came in at Rs 14,500-15,000 crore and FY24 capex guidance is at Rs 4,000-4,500 crore. The company intends to repay debt at Rs 5,000 crore,” said Goldman’s report.
Shares of Adani Ports jumped 8 per cent to Rs 597 on Wednesday, before paring some gains over a previous close of 553.30 on Tuesday. The stock has gained more than 51 per cent from its 52-week low at Rs 394.95 hit on February 2, 2023.
Another domestic brokerage firm, B&K Securities, also remains positive on Adani Ports, even after the recent rout in the Gautam Adani-led blue-chip counter. The brokerage sees no major stress for the company and finds valuations attractive at current levels.
B&K Securities has maintained its buy rating with a target price of Rs 920 in its report released on February 6, 2023.
“The stock is currently trading at FY24F PE of 17x 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 up to 14 times” it said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)
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