Adani Ports: Motilal Oswal recommends ‘buy’ with up to 29% upside

Domestic brokerage house Motilal Oswal Financial Services (MOFSL) reaffirmed its 'buy' rating on Adani Ports and Special Economic Zone (APSEZ) stock, maintaining a target price of ₹1,850, implying an upside potential of almost 29 per cent. The brokerage cited the company's strategic positioning and continued investments in port and logistics infrastructure as key drivers for growth.

According to MOFSL, APSEZ is well-positioned to surpass India's overall growth trajectory, thanks to a balanced port presence along both the western and eastern coasts and a diversified cargo mix. The company's heavy investments in its port and logistics businesses are expected to fuel long-term expansion.

MOFSL projected an 11 per cent growth in cargo volumes from FY24 to FY26, resulting in a compound annual growth rate (CAGR) of 14 per cent in revenue, 15 per cent in EBITDA, and 22 per cent in profit after tax (PAT) during the same period. Despite some short-term volume disruptions, the firm's long-term growth outlook remains robust.

Stock Price Trend

The stock has jumped 74 per cent in the last one year and 42 per cent in 2024 YTD. The Adani Group stock has lost around 2 per cent in September so far after a 5.6 per cent fall in August. Prior to that, it rose 6.2 per cent in July, 2.8 per cent in June and 8.5 per cent in May.

The stock hit its record high of ₹1,607.95 in June 2024. Currently trading at ₹1438.45, the large-cap stock is just 10.5 per cent away from its peak. Meanwhile, it has soared almost 91 per cent from its 52-week low of ₹754.50, recorded in October last year.

Temporary Disruptions in Volume Growth, Outlook Unchanged

During the first half of FY25, APSEZ handled 183 million metric tons (mmt) of cargo. While cargo volumes grew by 7 per cent year-on-year (YoY) in the first quarter, the growth was temporarily impacted by a worker strike at Gangavaram port in April-May 2024, which normalised by June. Severe weather conditions in Kutch also affected operations at the Mundra and Tuna ports in August 2024. Despite these challenges, APSEZ management maintained its full-year volume guidance of 460-480 mmt for FY25.

The company is expected to grow at a rate two to three times higher than India's overall cargo volume growth. APSEZ has set ambitious goals to become India’s largest integrated transport utility and the world’s largest private port company by 2030.

Expansion and Acquisitions Drive Long-Term Growth

APSEZ continues to prioritise capacity expansion, with recent developments including a concession agreement with Deendayal Port Authority to develop a berth with a 5.7 mmt capacity at Kandla, Gujarat. The new 300-metre berth is expected to be operational by FY27, further strengthening APSEZ’s presence at Deendayal port.

Additionally, APSEZ announced the acquisition of an 80 per cent stake in Astro for USD 185 million, valuing the company at USD 235 million. Founded in 2009, Astro operates 26 vessels across key regions, including the Middle East, India, Far East Asia, and Africa. This acquisition increases APSEZ’s fleet to 168 vessels, enhancing its presence in strategic markets and expanding its Tier-1 customer base.

Despite temporary setbacks in the first half of FY25, Adani Ports and SEZ is on track for long-term growth, driven by its strategic investments in port capacity, logistics infrastructure, and global acquisitions. With MOFSL projecting strong financial performance over the next few years, APSEZ remains well-positioned to achieve its ambitious goals and deliver solid returns for investors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.