Adani Ports gain on brokerages upgrade

Adani Ports and Special Economic Zone (APSEZ) was up 4% to Rs 430 on Friday, erasing most of its yesterday’s loss on BSE, after the brokerages upgrade the stock post December quarter (Q3FY18) results. On Thursday, the stock ended 4.4% lower at Rs 414 on BSE.

APSEZ has posted an 18% year-on-year (yoy) increase in consolidated net profit for the third quarter of 2017-18 financial year to Rs 9.94 billion while its consolidated income from operations grew 22% for the same period. Consolidated operating EBITDA (earnings before interest, tax, depreciation and amortization) increased by 46 % to Rs 19.67 billion in Q3FY18 from Rs 13.44 billion in Q3FY17. The cargo volumes were up 16% during the quarter.

“Cargo Volumes growth in Q3FY18 rebounded after a tepid Q2FY18. This growth was led by all round double digit growth in all major cargo that we handle. We foresee continued uptick in cargo volumes in India. While western ports in India will continue to grow we are confident of exponential cargo volume growth in Eastern and Southern coasts of India,” Karan Adani, Chief Executive Officer and Whole Time Director of APSEZ said.

“The cargo volumes were strong as the short term impact of Goods and Services Tax (GST) has been fading. As a strategy, the company continues to focus on high growth container segment and is reducing dependence on the coal cargo segment which has been under pressure. The Company reported operating margin of around 66% which was better than expected as the share of high value cargo improved,” analysts at IIFL Wealth Management said in result update.

“Going ahead, cargo volume is expected to grow at around 10% during FY18. Also, we believe decline in coal volumes is likely to get offset by the increase in container volumes, inline the company’s cargo diversification strategy,” it added. The brokerage firm maintains Accumulate rating on the stock with revised target of Rs 446.

“A commitment to improve balance sheet leverage, management confidence in meeting full year guidance, lower capex going ahead and assurance of a distribution policy for the free cash flow generated, leads us to maintain our recommendation at Accumulate with a revised SoTP target of Rs 450 per share,” analyst at Emkay Global Financial Services said in result update.

According to media report, analyst at Goldman Sachs upgraded the recommendation on Adani Ports to buy from neutral. The brokerage firm raised the target price to Rs 488 rupees from Rs 400.

In past three months, the stock had underperformed the market by gaining 2% against 8% rise in the S&P BSE Sensex till yesterday.

At 12:33 PM; it was up 3% at Rs 427 as compared to 0.27% rise in the benchmark index. The stock was the largest gainer among the Sensex and Nifty 50 index. A combined 4.67 million shares changed hands on the counter on BSE and NSE.