Adani Ports and Special Economic Zone Ltd. guidance for higher growth till financial year 2029 exceeds the estimate of Morgan Stanley, which remains overweight on the stock. In a note on Wednesday, the brokerage kept the target price for the company unchanged at Rs 1,517 apiece, implying a potential upside of 13.41% from the previous close.
The company is targeting 1,000-million-tonne cargo volume by fiscal 2029, 40% higher than the 713 MT Morgan Stanley estimated. The ports business is likely to ramp up activities in all ports, with special focus on those that have been recently acquired in the last few years. Adani Ports is likely to start commissioning Vizhinjam Port in Kerala and the West Container Terminal in Sri Lanka, the brokerage said in a note on Wednesday.
Adani Ports is looking to clock a consolidated revenue of Rs 65,500 crore by fiscal 2029, which is 25% higher than what Morgan Stanley guided for. Its logistics revenue guidance for fiscal 2029 is 188% higher than the brokerage's guidance.
The trucking segment is expected aid in growth acceleration. Trucking and container-rake revenue will contribute two-thirds of the total revenue, Morgan Stanley said.
Growth in agricultural logistics, bulk trains, warehousing are likely to support the Ebitda margin, the brokerage said. Economies of scale and network effect to support margin expansion.
Key Takeaways
Morgan Stanley keeps an 'overweight' rating on Adani Ports with an unchanged price target of Rs 1,517 apiece.
The target price implied a 13.41% upside from Wednesday's closing price.
Morgan Stanley assigned higher weight to a bull-case scenario, suggesting Adani Ports is a beneficiary of supply-chain diversification and India's rising consumption.
Terminal growth rate of 5% for the special economic zones and logistics business.
Upside risks: Faster-than-expected volume growth, logistics reports strong earnings growth, strong free cash flow and value-accretive acquisition
Downside risks: Slower-than-expected volume growth due to macro or micro factors, value-dilutive acquisitions domestically or internationally, and rising competitive intensity (in tariffs) at major ports for a sustained period. Any increase in related party exposure or slippage in investment grade ratings.
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