Shares of Adani Ports and Special Economic Zone hit a 52-week high as the largest private multi-port operator received a thumbs up from analysts. The Adani Ports share price was up nearly 4% around 1 pm on December 7, continuing the stock’s upward rally over the last one month.
Brokerages are bullish on the Adani Ports stock, expecting a faster-than-expected turnaround in the Krishnapatnam Port (KPCL) acquisition.
Adani Ports had completed the acquisition of Krishnapatnam Port at an enterprise value of ₹12,000 crore in October this year.
Adani Ports has improved the margins from 58.1% last year to 68.1% this year. This was achieved thanks to price hikes and improved operational efficiencies, as noted by the company in a recent analyst meet.
Analysts at Kotak Institutional Equities expect a yield of 3 times of the invested value from the KPCL asset. The report further states ‘unbridled growth prospects’ lie ahead for Adani Ports from this investment.
“Adani Ports has turned around its Krishnapatnam acquisition significantly ahead of our previous estimates, leading to an earnings upgrade,” Nomura India analyst Priyankar Biswas said in a note, according to a BloombergQuint report.
The note issued by Jefferies observes that Krishnapatnam Port’s margins rose to 68% in the first six months of the financial year 2020-21.
“Adani Ports showcased the management focus to improve Krishnapatnam Port’s (KPTL) margins from the current 68 percent to 80 percent by FY25E. KPCL is a value-accretive acquisition with 26 percent equity IRR even on our conservative 73 percent FY25E margin estimate,” Jefferies said, according to a CNBCTV18 report.
Brokerages raise target price
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In a recently held analyst meet, Adani Ports stated that it has undertaken various measures to improve operational efficiencies, and re-negotiated tariffs with key customers, according to a Times Now report.
As a result, various brokerages have revised their target prices upward, with an upswing of up to 15% to the Adani Ports share price.
Brokerage
Target Price
Upside
CLSA
₹540
15%
Nomura
₹530
13%
Jefferies
₹525
12%
Kotak Institutional Equities
₹495
6%
Source: Brokerages, MoneyControl
Note: Upswing calculated based on share price as at 1 pm, December 7, 2020.
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