Adani Ports is making 68% margin from one of its ports – the stock has doubled since lockdown

• Adani Ports’ share price continued its upward rally, hitting a 52-week high as analysts gave it a thumbs up.
• Adani Ports is India’s largest private multi-port operator and is a part of the Adani Group.
• Adani Ports acquired Krishnapatnam Port (KPCL) in October at an enterprise value of ₹12,000 crore.
• Analysts expect a yield of up to three times from the KPCL asset.
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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.


The Krishnapatnam boost

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 $4.

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 $4.

Brokerages raise target price

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 $4.

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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