Adani Cash-Cow Stock To Debut On Sensex From June 24; Wipro To Exit; Canara Bank, REC, PNB In Focus Too

As part of the semi-annual reconstitution by BSE, a host of stocks will be reshuffled on the exchange's indices with effect from June 24. The eye-candy is the rejig of 30-scrip Sensex where Adani Group's cash-cow stock Adani Ports is going to debut on the benchmark for the first time. This will also be the first Adani stock to enter Sensex. Adani Ports will be replacing Azim Premji-backed IT giant Wipro.

Adani Ports Share Price:

Despite the bombshell report of US short seller Hindenburg, Adani Ports emerged as a rising star even when its siblings at the port-to-power empire were struggling to hold onto bulls. The Hindenburg report in the first quarter of 2023 resulted in a market rout of over 100 billion dollars.

From flagship company Adani Enterprises to Adani Wilmar, stocks witnessed a frenzy of selling. But even still Adani Ports rose by 24.53% in 2023 and has continued its uptrend in 2024 so far. Adani Ports is also among the top picks of global investors, especially GQG Partners. YTD, the stock is up by 42%.

As of June 21, 2024, Adani Ports' share price is at Rs 1485.70 apiece with a market cap of Rs 3,20,931.84 crore. The stock's 52-week high and low is at Rs 1,607.95 apiece and Rs 702.85 apiece respectively.

The outlook in Adani Ports is healthy. As per Jefferies report, operationally, Adani Ports is continuing to move from strength to strength, with market share moving up to 27% from 14% in FY15 and expected to be 30%+ by FY26 27E.

Jefferies also said, "4QFY24 EBITDA was 5% lower than expectations as realisations were a tad lower. Management commentary was confident about double-digit growth and FY25E volume guidance at 460-480 MMT (10-14% rise YoY) is in line with our estimates. Capex prudence and return focus remain. Market share gains continue, with Dedicated Freight Corridor commissioning at Mundra also helping.
Logistics potential is the sweetener, in our
view."

On the valuation, Jefferies said, "As core port EBITDA growth remains upward of double digits, backed by volumes, we remain positive on the stock. Our Rs1,640 PT is based on 16.5x EV/ EBITDA Sept. 2026E, broadly in-line with the 16.4x mean since 2009. Downside risks include 1) incremental negative news flow on group leverage and 2) disappointing market share gains at acquired ports."

In May 2024, Adani Ports handled 35.8 MMT of cargo volumes, which is muted compared to the same month a year ago. Adani Ports said, "Due to the shutdown of the Gangavaram Port, APSEZ lost around 6 MMT of cargo volumes in April & May'24. However, with the operations now restarted, we are
confident of recovering these lost volumes in the coming months."

Adani Ports flagship Mundra port, on the other hand, touched a new milestone of handling 17.6 MMT of cargo in May'24, which is the highest ever monthly volume at any of the Indian ports. The port also achieved another milestone of handling over 7 Lac TEUs in a month.

Wipro Share Price:

Unlike Adani Ports, this tech player is struggling when it comes to financial numbers due to an uncertain macro environment with weak discretionary spending that heavily impacted the IT sector's FY24 including Wipro.

In Q4FY24, Wipro's earnings were broadly mixed, while revenue guidance was weaker than street estimates. In the March 2024 quarter, Wipro's PAT is up by 4.95% from Rs 2,694.2 crore in Q3FY24, but down by 8.5% from its PAT of Rs 3,074.5 crore in Q4 of last year. Meanwhile, revenue in the quarter came in at Rs 22,208.3 crore, which was flat sequentially but down by 4.4% YoY. In dollar terms, Wipro's IT services segment revenue was at $2,657.4 million, an increase of 0.1% QoQ and a decrease of 6.4% YoY.

For the first quarter of FY25, Wipro expects revenue from our IT Services business segment to be in the range of $2,617 million to $2,670 million. This translates to sequential guidance of (-)1.5% to +0.5% in constant currency terms.

YTD, Wipro shares only gained by 3% on BSE. On the exchange, the stock is at Rs 490.55 apiece, with a market cap of Rs 2,56,554.91 crore. The stock's 52-week high and low are at Rs 546.10 apiece and Rs 375 apiece respectively.

However, whether a turnaround in macro conditions is probability in Q1 of FY25 will be keenly watched, especially after Accenture's latest quarterly results.

In the third quarter of 2024, Accenture updates its business outlook for fiscal 2024; now expects full-year revenue growth of 1.5% to 2.5% in local currency, full-year foreign-exchange impact of negative 0.7%, GAAP EPS of $11.29 to $11.44 and adjusted EPS of $11.85 to $12.00; continues to expect GAAP operating margin of 14.8%, adjusted
operating margin of 15.5% and free cash flow of $8.7 billion to $9.3 billion.

Accenture has witnessed a reversal in its performance on key verticals including the communications, media and technology business.

In JM Financial's view, Accenture's management expects consulting to return to growth after five quarters of decline. Managed Services bookings grew 42%, taking TTM book-to-bill to 1.3x, the highest since the pandemic. Communication, Media and Tech (CMT) - one of the most stressed verticals - grew 4% QoQ, after seven quarters of sequential decline. Management indicated that large deals lay a good foundation for FY25 growth. Though management characterised the demand environment as "more of the same", these is evidence that the worst is possibly behind. From a read-through perspective, improvement in consulting is positive for Wipro.

On Wipro, Kotak Institutional Equities has recommended selling for a target price of Rs 440. The Q1FY25 will be key to knowing whether IT companies including Wipro are out of the woods or not.

Other stocks on BSE indices rejig:

BSE 100: Stocks like REC, HDFC Asset Management Company, Canara Bank, Cummins India, and Punjab National Bank are included. These stocks will replace Page Industries, SBI Cards and Payment Services, ICICI Prudential Life Insurance Company, Jubilant FoodWorks, and Zee Entertainment Enterprises as they are going to be dropped from the index.

BSE Sensex 50: On this index, Tata Group-backed retail company, Trent Ltd will be added, while Divi's Laboratories will be excluded.

BSE Bankex: Surprisingly, Yes Bank and Canara Bank will be added to BSE Bankex, in place of AU Small Finance Bank and IDFC First Bank.

BSE Sensex Next 50: Stocks like REC, PNB, Divi's Lab, HDFC AMC, Canara Bank, and Cummins India will be included. They will replace stocks like Trent, Page Industries, SBI Cards and Payment Services, ICICI Prudential Life Insurance, Jubilant FoodWorks, and Zee Entertainment Enterprises on the index.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.