Operationally, Adani Ports is continuing to move from strength to strength, with market share moving up to 22 per cent from 14 per cent in FY15 and expected to be 31 per cent by FY25E, Jefferies said. Jefferies has 'Buy' ratings on two Adani group stocks namely Adani Transmission and Adani Ports & SEZ. Adani Transmission, it said, could be a key beneficiary of the Distribution Amendment Act if it comes through, the brokerage said adding that Medium-term double-digit growth for Adani ports should continue as it replicates the Mundra market share gain story at its acquired ports.
In the case of Adani Ports, Jefferies said the company is India’s largest port operator by volume with a dominant 22 per cent market share. It noted that the management is looking to leverage its strong balance sheet to benefit from gradual volume recovery, as global container rates ease. It is also looking to grow in logistics/warehousing to offer customers end-to-end solutions, Jefferies said in a note..
"Operationally, Adani Ports is continuing to move from strength to strength, with market share moving up to 22 per cent from 14 per cent in FY15 and expected to be 31 per cent by FY25E. As core port Ebitda growth remains upward of double digits, backed by volumes, we remain positive on the stock. Our Rs 800 price target is based on 13 times September 24E EV/Ebitda and discount to the historical mean vs in-line earlier," it said.
Downside risks include incremental negative news flow on group leverage and disappointing market share gain at acquired ports.
In the case of Adani Transmission, Jefferies said it is India’s only pure-play private-sector listed entity on the transmission and distribution sector. The company is the largest private-sector player in transmission with a market share of 22 per cent in TBCB bids. B2C interface is rising with access to 12 milion-plus consumers in the Mumbai distribution business, it said while adding that the debt:equity is being comfortable for an asset business at 3:1.
"Capital management program focus is on reducing volatility in interest costs, apart from reducing it. Key beneficiary of the Distribution Amendment act if it comes through. We have a Buy rating on the stock," it said while suggesting a target of Rs 3,275 on the stock.
Jefferies said its price target for Adani Transmission factors cost of equity of 12 per cent, long-term debt rate at 8.5 per cent (current 8-8.8 per cent range) with a terminal growth of 6 per cent. It said the higher terminal growth reflects pick-up in transmission spend and potential growth from the Distribution amendment act.