Adani Group’s target price has been raised by Jefferies. Key triggers

Global brokerage firm Jefferies said in a note that it had interacted with Adani Ports management to discuss business operations. Adani Ports aims to leverage its strong B/S to benefit from a gradual recovery in volumes as global container rates decline and it expands into logistics/warehousing to offer customers end-to-end, the broker pointed out.

“We are increasing our FY23-25E volumes by 3-7% to account for 1QFY23 and EPS by 5-11%. Mid-term double-digit growth is expected to continue as it replicates the market share gain story of Mundra in its acquired ports,” the note reads. The brokerage maintained its buy rating on Adani Group stock with a target price of 1,100 per share (since 850).

India’s logistics cost is 14% of GDP compared to only 8% in the United States. Indirect logistics costs of $174 billion (6% of GDP) are a significant component and point to systemic inefficiencies. Adani Ports is a market leader in ports in India, and if it can back that up with inland warehousing/logistics, it would only add to its USP and market share gains, as it n There is no similar company in India that provides such integrated services on a large scale, he pointed out.

“We hosted Adani Group CFO, Jugeshinder Singh, at our September 2022 Jefferies Asia Forum. He emphasized that profitability is a priority even in international investments. Adani Ports management also emphasized that they were entering global markets with strategic partners so that risk is mitigated, and they have better color on the country’s landscape to develop port operations. Their major global projects include the Port of Israel ( 85 billion investment, 70% of the capital) and Sri Lanka Port ( 53 billion investment, 51% equity),” Jefferies added.

Operationally, Adani Ports continues to strengthen, with market share increasing from 14% to 22% in FY15 and expected to reach 31% by FY25E. While core port EBITDA growth remains above double digits, supported by volumes, Jefferies remains positive on shares of Adani Ports. However, downside risks, according to the brokerage, include further negative news flow on the group’s leverage and a disappointing market share gain in acquired ports.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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Jennifer C. Burleigh