September 23, 2022

Adani Ports Q3 FY21 gross sales had been 11% under expectations as quantity contribution container JVs (decrease profitability) was larger. Krishnapatnam port (KPCL) acquisition is totally accounted for in 3Q and has led to some one-off integration bills additionally. Jefferies lowered their FY21E-22E EPS by 3-7% however raised it by 2% for FY23E to account for a extra gradual margin enchancment at KPCL. Jefferies believes in Adani Ports administration dedication to drop promoter pledges is a key re-rating set off.

Adani Ports Volumes up 38% YoY in Q3, up 20% ex-KPCL:

Main ports’ cargo rose simply 2% YoY in Q3. Adani Ports continued to realize market share, notably in container volumes. Mundra, Adani’s flagship port, noticed 38% YoY rise in container volumes vs 10% YoY in JNPT. Adani Ports administration talked about that world container scarcity mustn’t affect India as finish customers have adjusted the affect in pricing and it ought to ease out over the following few months/quarters. Adani Ports EBITDA margins rose 256 bps YoY to 66.4% attributable to working leverage and will additional enhance as KPCL’s price and pricing construction is revamped step by step.

Adani Ports is actually diversified participant:

Adani Ports’ has six ports on the West Coast and 5 on the East Coast. 4 ports accounted for 90% of cargo volumes in FY20, with Mundra having the lion’s share at 63%. Adani Ports administration is optimistic on Dhamra and Katupalli seeing robust progress inside ports. Curiously, East Coast has accounted for 38% of incremental volumes within the final three years and is predicted to extend to 33% general by FY23E.

Adani Ports Promoter pledges are 22% of their holding vs 45% in Nov 2020:

Operationally, Adani group’s execution capability within the ports enterprise can hardly be questioned. It’s the proper mix of cargo and geographical diversification with constant market share progress seen over time. Administration is strolling the speak of environment friendly money circulation utilisation, no incremental inter-group transactions and mentioned a bias to directionally increase the dividend payout. The current Adani Inexperienced-Whole deal provides visibility of additional promoter pledge discount, in-line with administration steerage of negligible single digit stage. Jefferies have lowered their price of fairness to mirror this improved visibility.

Adani Ports Valuations:

Jefferies revised Adani Ports worth goal to Rs 670 (Rs 636 for Ports and Rs 34 for SEZ) vs Rs 630 is DCF primarily based (COE of 11.0% vs 12.0%) and displays their revised EPS

Adani Ports Draw back Danger:

Sustainable sharp slowdown in port volumes


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