Adani Ports and Special Economic Zone (APSEZ) shares soared 7 per cent to hit a fresh high; Should you invest?
Adani Ports and Special Economic Zone (APSEZ) shares soared 7 per cent to hit a fresh high of Rs 1,082 per share on the BSE on December 6 after global brokerage firm Citi raised target price on the counter to Rs 1,213 apiece from Rs 972, implying an upside of over 12 per cent.
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In the past one week, the stock of Adani Ports & SEZ has soared over 23 percent as against 4 percent rise in the benchmark Sensex.
Adani Ports share price jumped 15 per cent in the previous session after it reported a strong 42 per cent year-on-year (YoY) growth in November cargo volumes.
Year-to-date, Adani Ports share price has gained about 24 per cent.
In an exchange filing on December 4, Adani Ports said growth was witnessed across all three broad cargo categories – dry bulk (over 60 per cent YoY), containers (over 26 per cent) and liquids and gas (over 23 per cent).
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Following the company’s business update, several brokerage firms expressed their positive views on the stock.
Among global brokerage firms, Citi maintained its buy call on the stock with a target price of ₹1,213, reported CNBC-TV18.
“The company continues to execute well and grow its dominance in India’s port and logistics space. CY23 valuations have been suppressed due to negative news flow around the Adani Group. Despite rally post elections results, we think that there is still ample scope for valuations to rerate,” CNBC-TV18 quoted Citi saying.
Brokerage Kotak Institutional Equities reiterated its buy call on the stock and raised the target price by 12 per cent to ₹1,060.
The brokerage firm expects a 20 per cent upside in Adani Ports over the next year.
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“History suggests the stock has traded in the range of 10-16 times one-year forward multiple for most of the past seven years. We value the company at an implied multiple of 13 times on a two-year forward basis,” Kotak said.
“We increase our fair value (target price) by a higher 12 per cent to ₹1,060 on account of roll-forward and a lower (but still stiff) WACC (weighted average cost of capital) of 11.25 per cent. The stock trades at sub-12 times FY2025E EV/EBITDA and is the top pick within our transportation coverage. Buy for about 20 per cent upside over the next year,” said Kotak.
Kotak increased its EBITDA estimates by 5-6 per cent to account for higher volume growth for Mundra, Dhanraj and Ennore ports.
“Over FY2023-26E, we expect 9 per cent, 10 per cent and 15 per cent volume CAGRs for Mundra, existing ports and overall portfolio, respectively. EBITDA CAGR would be higher at 21 per cent on account of realisation growth and margin expansion,” said Kotak.
