Adani Ports is expected to outpace India’s overall growth. Buy for target price of ₹1850 (31% upside): Motilal Oswal

Temporary volume hit in 1H; growth outlook intact

 Adani Ports & SEZ (APSEZ) handled 183mmt of cargo volumes over AprAug’24. Volumes in 1QFY25 grew 7% YoY but were affected by a worker strike at Gangavaram port during Apr-May’24, which normalized in Jun’24. Aug’24 volumes were also impacted by severe weather in Kutch, affecting operations at Mundra and Tuna. Despite these disruptions in 1HFY25, the management maintains its volume guidance of 460-480mmt for FY25.

 APSEZ continues to focus on capacity expansion. It recently signed a concession agreement with Deendayal Port Authority (DPA) to develop a berth with capacity of 5.7mmt at Kandla, Gujarat. The 300m berth is set to be operational by FY27, expanding APSEZ’s presence at Deendayal port.

 Further, APSEZ has agreed to acquire 80% of Astro for USD185m, valuing the company at USD235m with a 4.4x EV/FY25E EBITDA multiple. Founded in 2009, Singapore-headquartered Astro operates 26 vessels across the Middle East, India, Far East Asia and Africa. The acquisition increases APSEZ’s fleet size to 168 vessels, expanding its presence in key regions and enhancing its Tier-1 customer base.

 While 1HFY25 volumes were temporarily impacted by a worker strike and weather conditions, the situation is normalized now. For FY25, the volume guidance of 460-480mmt remains unchanged. APSEZ is expected to record 2-3x of India’s cargo volume growth. APSEZ targets becoming India’s largest integrated transport utility and the world’s largest private port company by 2030. We expect APSEZ to report 11% growth in cargo volumes over FY24- 26. This would drive a CAGR of 14%/15%/22% in revenue/ EBITDA/PAT over FY24-26. We reiterate our BUY rating with a TP of INR1,850 (based on 20x FY26E EV/EBITDA).

Valuation and view

 APSEZ is expected to outpace India’s overall growth, driven by a balanced port mix along India’s western and eastern coastlines and a diversified cargo mix. The company continues to invest heavily in the port and logistics business to drive growth.

 We expect APSEZ to report 11% growth in cargo volumes over FY24-26. This would drive a CAGR of 14%/15%/22% in revenue/EBITDA/PAT over FY24-26. We reiterate our BUY rating with a TP of INR1,850 (premised on 20x FY26E EV/EBITDA).

Adani Ports & SEZ Motilal Oswal