Adani Ports' New Deal Could Lead To Faster Volume, Earnings Growth: Morgan Stanley

Adani Ports and Special Economic Zone Ltd.'s new contract to operate and maintain a container terminal at Kolkata Port could translate into faster volume and earnings growth for the ports operator, according to Morgan Stanley.

The company was granted a letter of intent after it won the five-year contract through a competitive bidding process. It will deploy cargo handling equipment within seven months from the date of the letter of acceptance, according to an exchange filing on Friday.

Under the contract, the Adani Group company will be responsible for deployment, operation, and maintenance of equipment for container handling operations at the Netaji Subhas Dock at the Syama Prasad Mookerjee Port in Kolkata.

This contract will aid the company drive synergies with its trans-shipment hubs at Colombo and Vizhinjam, which it aims to commission this year, the filing said.

Faster-than-expected volume growth and strong earnings growth are some upside risks, according to Morgan Stanley. The company can also expect free cash flow and value-accretive acquisition, the brokerage said.

While, a slower-than-expected volume growth, driven by macro or micro factors and value-dilutive acquisitions domestically or internationally could be some downside risks, it said.

A rise in tariffs by competitive companies at major ports for sustained periods could be a potential risk. Slippage in investment grade ratings might also affect the company, Morgan Stanley said.

Shares of Adani Ports were trading 0.89% higher at Rs 1,391 apiece, against an advance of 0.15% in the benchmark Nifty 50 as of 11:13 a.m.

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