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The shares of India’s largest private port operator gained traction this week after global brokerage firm Citi gave a ‘buy’ recommendation with a 26 percent upside from Wednesday’s trading price of Rs 1,758 a share. 

Adani Ports & Special Economic Zone is in the business of development, operations, and maintenance of port infrastructure and is also linked to a multi-product Special Economic Zone (SEZ) and related infrastructure. 

On Wednesday, Adani Ports and Special Economic Zone Ltd. shares were trading at Rs 1,398 a share on the National Stock Exchange, down 0.46 percent from the previous close. 

The company’s shares have yielded returns of 68 percent over the past six months and 122 percent over the course of a year. 

The company has experienced a 45 percent annual increase in revenue, escalating from Rs 4,786 crore in Q3 FY23 to Rs 6,920 crore in Q3 FY24. Simultaneously, net profit surged by 65 percent, climbing from Rs 1,337 crore to Rs 2,208 crore during the corresponding period. 

Based on a strong outlook on Adani Ports and Special Economic Zone Ltd. (APSEZ), global brokerage firm Citi has raised its target price from Rs 1,564 per share to around ₹1,758 apiece a share representing a 26 percent increase from Wednesday’s (April 03th) trading price. The rationale behind providing such a recommendation is, 

According to Citi’s report, Adani Ports is poised to deliver robust performance in its Q4FY24 earnings, marked by favorable trends in volumes, revenue, EBITDA, and cash flow. 

Citi predicts that the substantial increase in volumes will drive a year-on-year core-port EBITDA growth of approximately 29%. Additionally, Citi anticipates a 27% growth in consolidated EBITDA and a 24% increase in profit before tax compared to the previous year. 

Citi emphasized that the company’s valuations remain reasonable, with a P/E ratio of 30 and an EV/EBITDA ratio of 19 based on FY25 estimates. According to Citi, these valuations indicate significant potential for growth considering the high quality and scale of the underlying business.

Additionally, Citi pointed out that Adani Ports has demonstrated resilience and strength following a short-seller report last year. The company has shown strong business momentum, decreased leverage, and enhanced market dominance. 

In March, Adani Ports announced a record-breaking monthly cargo volume of 38 million metric tonnes (MMT).This achievement has propelled the company’s global cargo handling for the financial year 2024 to 420 MMT, surpassing the previously guided range of 370-390 MMT set in January 2024. 

Notably, Adani Ports revised its guidance for the financial year 2024 upwards from 350-370 MMT to 370-390 MMT in January. Additionally, Mundra Port, alone handled more than 7.4 million TEUs, representing over a third of India’s container cargo. 

Written by Omkar Chitnis

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