Analysts upbeat post Q4 results, remain bullish for long term

The stock of Adani Ports and Special Economic Zone tumbled 4 per cent to ₹738.20 on the BSE on Wednesday, after the company said it was open to abandoning the Myanmar project and write down that investment. Adani Ports, which had entered the Myanmar market in 2019, has so far invested $127 million for the container terminal at Yangon, including an upfront payment of $90 million.

However, analysts said the stock is a good long-term bet. Fundamentally, the company is strong, said an analyst working for a domestic brokerage firm. Even on Myanmar, the company is yet to take a final call and the reaction of the stock price is just a knee-jerk one, he added.

Strong Q4 show

According to analysts, the company has posted a strong set of quarterly numbers despite Covid cases. Adani Ports posted a 285 per cent year-on-year jump in consolidated net profit for the March quarter at ₹1,288 crore. The Gautam Adani-owned company had posted a net profit of ₹334 crore during year-ago period. Revenue from operations for the quarter rose 23.5 per cent to ₹3,608 crore (₹2,921 crore).

Foreign brokerage Jefferies, which remained positive on the stock, said: “We believe three drivers will re-rate the stock from current levels: Market share to rise from 21 per cent to 32 per cent with recent acquisitions by FY25, ROE back at 20 per cent with asset sweating, and further drop in promoter pledges. Jefferies retained its ‘Buy’ rating on Adani Ports with a revised target price of ₹910 from ₹670 earlier.

Promoter pledges have come down to 16 per cent of holding from 45 per cent in November 2020: “Adani Promoters have dropped pledges sharply post their 20 per cent stake sale in Adani Green to Total Group for $2.5 billion. Management commitment is to further drop this to negligible levels,” said the Jefferies note.

Market leadership

Edelweiss Securities said, Adani Ports & SEZ has navigated the pandemic year with strong market share gains and new acquisitions, thereby further fortifying its number one position in the ports space. Edelweiss maintained its ‘Buy’ call on Adani Ports with a price target of ₹875. Citi Research also maintained its ‘Buy’ rating on Adani Ports with a target price of ₹1,000 due to strengthening of its pole position following the acquisition of Krishnapatnam Port Company and Gangavaram Port.

Word of caution

However, another foreign brokerage CLSA has downgraded Adani Ports & SEZ to ‘Underperformer’ from ‘Outperformer’ though it raised the target price to ₹816 from ₹770

“Led by the second wave of Covid-19, the management guided FY22 volume of 310-320 mt (as against CLSA estimate of 327 mt), which could disappoint market,” said the foreign brokerage. Post 35 per cent rally over past 3 months, the stock offers limited upside, it said.

Source: The Hindu Business Line