Adani Ports Share Price Soars 7% On Strong FY25 Guidance; Motilal Oswal Gives 'BUY' Rating, Check TP

The Adani Group has approached the Securities and Exchange Board of India (SEBI) to settle allegations of breaching public shareholding norms at its listed companies. Meanwhile, Adani Ports and Special Economic Zone (APSEZ) continues its upward momentum, with shares surging 7% to Rs 1,296 on the National Stock Exchange (NSE) by 12:40 pm today.

The regulatory troubles date back to 2020, with SEBI alleging that several Adani Group companies, including flagship Adani Enterprises, Adani Power, and Adani Energy, misclassified the shareholding of certain entities. SEBI has sought to recover Rs 2,500 crore ($295 million) from these entities and issued show-cause notices on September 27 to around 30 entities linked to the group.

In response, Adani Enterprises, along with directors Vinay Prakash and Ameet Desai (Ambuja Cements), submitted settlement proposals last week. Separately, Emerging India Focus Funds (EIFF), a Mauritius-based portfolio investor allegedly linked to Gautam Adani's brother Vinod Adani, proposed a settlement of Rs 2.8 million ($33,035). These moves appear to be precautionary as the entities have contested SEBI's charges.

The Economic Times report suggests these settlement proposals reflect the group's intent to resolve disputes with the regulator. However, the Adani Group has refrained from issuing a public statement on this matter so far.

US Legal Accusations

Adding to the scrutiny, US authorities last month accused Gautam Adani and senior executives of orchestrating a $265 million bribery scheme to secure power supply contracts and misleading US investors. The group denied these allegations, terming them baseless. Meanwhile, Adani Green Energy clarified that Gautam Adani and its directors were not implicated in violations of the US Foreign Corrupt Practices Act (FCPA).

Despite these challenges, APSEZ has emerged as a bright spot for the group. The stock has delivered robust returns in 2024, gaining nearly 25% year-to-date and approximately 50% over the past year.

APSEZ has transitioned from a port operator to an integrated transport utility, offering end-to-end solutions from port gates to customer premises. It currently operates 15 strategically located ports along India's eastern and western coasts, accounting for 27% of the country's total port volumes.

Financial and Operational Metrics

The company's management recently reiterated its FY25 cargo volume guidance of 460-480 million metric tons (MMT) and EBITDA guidance of Rs 17,000-18,000 crore. Between April and November 2024, APSEZ handled 293.7 MMT of cargo, marking a 7% year-on-year increase, driven by a 19% rise in container volumes and a 7% growth in liquid and gas cargo. Despite disruptions caused by worker strikes and severe weather, the company remains confident in achieving its targets, with FY25 revenue projected at Rs 30,000 crore. APSEZ has also outlined long-term goals, aiming to double its cargo volumes to 1 billion tons by 2029, driven primarily by domestic port volumes.

Analyst Recommendations

Brokerage firms remain optimistic about APSEZ. Motilal Oswal Financial Services analysts believe APSEZ is well-positioned to surpass industry growth and expand its market share. The seamless integration of its logistics and port operations is enhancing service capabilities and transforming the company into a comprehensive transport utility. The brokerage maintains its "BUY" rating for APSEZ, setting a target price of Rs 1,530 per share.

APSEZ aims to double its cargo handling volumes to 1 billion tons by 2029, primarily driven by domestic port volumes of 850 million tons, excluding any inorganic growth. This expansion is expected to be fueled by market share gains and increased capacity at existing ports. The logistics segment is projected to add significant value to the domestic port business by strengthening last-mile connectivity, noted the brokerage firm.

The company is poised to outpace India's overall growth with a well-balanced port mix along the western and eastern coasts and a diversified cargo portfolio. Significant investments in port and logistics infrastructure underline its growth strategy. Analysts forecast a 10% compound annual growth rate (CAGR) in cargo volumes between FY24 and FY27, leading to revenue, EBITDA, and PAT CAGR of 15%, 15%, and 21%, respectively, over the same period, said Motilal Oswal.