Macquarie initiated coverage on Adani Ports & Special Economic Zone Ltd. with an ‘outperform’ rating, on the back of its diversified mix, healthy cash flows and optimal positioning in the space.
The target price has been set at Rs 1,500 as the brokerage cites ports cargo volume outperformance against all India average. This is also supported by further scale-up of the company’s logistics business.
Adani Ports is well positioned to capitalise on India’s long-term growth potential because its businesses are thematically aligned with the nation’s development, the brokerage noted.
This view is also backed by the diversified port and cargo mix in the company’s offerings. The increasingly integrated nature of logistics should bring in further customer lock-in, according to Macquarie.
Visibility of healthy recurring operating cash flows remains high, and this is also supported by diversification and customer partnerships.
Pole Position In Ports
With logistics growth in the fast lane, Adani Ports remains India’s largest port operator. The company is also set to see growth in twice the rate of the country’s cargo volume.
The diverse cargo handled, the locations of ports, hinterland connectivity, customer partnerships, and the early-mover advantage are key positives, the brokerage said.
The network effect of a rapidly growing logistics business also provides clearer visibility of growth. Management’s target for the company’s logistics business is a 40-45% revenue CAGR over financial year 2025 to 2029.
Investing For Growth
Adani Ports plans capex of Rs 80,000 crore over FY25-29 for organic domestic business growth (compared to Rs 42,000 crore organic over FY15-24). This includes domestic ports (Rs 45,000-50,000 crore) and logistics (Rs 20,000-25,000 crore).
With massive capex plans on the domestic front, the Adani group company will also evaluate international port expansion opportunities. By 2030, Adani Ports targets 800-850 MMT domestic cargo volume, implying up to 11% domestic cargo CAGR over financial year 2024 to 2031.
Strong Cash Flow
There is ample firepower for growth, according to Macquarie. Adani Ports’ average operating cash flow, over Ebitda stood at nearly 75% over the previous year.
The brokerage expects cash-flow generation to remain strong given the in-port cargo mix as well. This is also paired with constant diversification.
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. Read more on Markets by NDTV Profit.Macquarie has a target price of Rs 1,500 on Adani Ports stock citing ports cargo volume outperformance against all India average. Read MoreMarkets, Business, Notifications
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