Adani Stocks Alerts: Adani Ports Up 19% In 5 Sessions, Gains 160% From 1-Year Lows; To Consider NCDs Issuance

Adani Group-backed stocks were on a massive bull run during the trading week that ended on December 8th. From the 10 Adani stocks, the conglomerate's ports flagship company, Adani Ports was in the limelight especially after reports said that US officials considered Hindenburg Research's allegations of corporate fraud against Adani as "inconsequential". This week, Adani Ports went from hitting a new 52-week high to garnering nearly 19% weekly upside. From its 1-year low, Adani Ports stock has zoomed nearly 160%, giving nearly 3-fold returns in 10 months.

On December 8th, Adani Ports share ended at Rs 1022.60 apiece, down by 1.63%. This is because, after a strong bulls wagon during the majority days of the week, investors cashed in gains on Friday.

Adani Ports' share price touched a new 52-week high of Rs 1,082.95 apiece. During this week, the stock's overall gains are over 18.5% on BSE. In six-month span, the stock advanced by over 39% on the exchange.

This Adani stock had touched a new 52-week low of Rs 394.95 apiece on March 2, 2023, when investors were nerve-wracked in Adani shares after the scandalous allegations in the bombshell report of Hindendurg in late January 2023. Adani shares suffered extreme volatility in the first quarter of 2023 due to the US short seller's controversial report.

From a 1-year low, Adani shares have skyrocketed by at least 158.92% on BSE. If investors had bought Adani Ports shares on March 2, with an investment of Rs 50,000 then their investment value would have climbed by 2.6-fold. In simple words, Adani Ports shares have more than doubled the investment of shareholders in 10 10-month span.

In the latest development, Adani Ports is planning to raise funds through the issuance of non-convertible debentures.

In its regulatory filing, Adani Ports said, 'the Board of Directors of the Company will be held on Tuesday, 12th December 2023, inter alia, to consider the proposal for (i) issuance of Non-Convertible Debentures and (ii) issuance/ renewal of Non-cumulative redeemable preference shares, on private placement basis/ preferential basis, in
one or more tranches."

Broadly, the Adani shares are rallying because as per the latest report, a US-based International Development Finance Corp (DFC) found the accusations made by Hindenburg Research against the port-to-energy conglomerate to be irrelevant. As per a Bloomberg report, DFC conducted a due diligence investigation before extending the conglomerate a $553-million loan for a container terminal in Sri Lanka.

In its regulatory filing, Adani Ports clarified the US agency report. The company said, "We would like to inform the Company vide its letter dated November 8, 2023, has submitted to you a Media Release titled "U.S. International Development Finance Corporation, America's development finance institution, to fund CWIT, Adani's JV in Sri Lanka, for $553 Million - Development of CWIT will support the growth of the Sri Lankan economy."

Last month, DFC announced that it will be funding Colombo West International Terminal Pvt. Ltd. (CWIT)
- a consortium of India's largest port operator Adani Ports and SEZ Ltd., Sri Lanka's leading enterprise John Keells Holdings (JKH) and the Sri Lanka Ports Authority - to the tune of $553 million. Notably, this is the first time that the U.S. government, through one of its agencies, is funding an Adani project, which is a ringing endorsement of the Adani Group. It shows their confidence in the Group's ability to invest and create a world-class container facility in Colombo Port.

Adani Ports has already surpassed brokerage Kotak Institutional Equities' target price of Rs 1,060 this week.

In its brokerage note, Kotak said, "The sharp 2X/3X industry growth on an organic/overall basis for ADSEZ reflects the sharp focus on operational efficiencies, helping gain business by offering a better service level for the same price. It also reflects the benefits of the addition of new cargo classes in Mundra and Dhamra ports. An integrated portcum-logistics service is also helping it gain market share. Finally, the sensitivity to select cargo classes (thermal coal, iron ore) is helping as this starts to see normalized volume levels in select ports (Mundra, Gangavaram, Krishnapatnam)."

Further, the brokerage's note added, "We increase our EBITDA estimates by 5-6% to account for higher volume growth for Mundra, Dhanraj and Ennore ports. Over FY2023-26E, we expect 9%/10%/15% volume CAGRs for Mundra/existing ports/overall portfolio. EBITDA CAGR would be higher at 21% on account of realization growth and margin expansion."

Also, Kotak's note said, "Adani Ports has demonstrated higher-than-expected port volume/revenue/ EBITDA growth of 15%/23%/22% in the past three years. Its FY2030 volume target of 1,000 mn tons suggests a healthy 16% volume CAGR over the next six years. We
find the sub-12X FY2025E EV/EBITDA trading multiple on FY2025 quite attractive in such a context. History suggests the stock has traded in the range of 10-16X one-year forward multiple for most of the past seven years. We value the company at an implied multiple of 13X on a two-year forward basis."

During the first eight months of FY24 (April-November 2023), Adani Ports handled around 275 MMT of cargo, a healthy 21% Y-o-Y growth. This marks over 70% of the top-end of its full-year guidance range of 370-390 MMT. Also, logistics volumes continue to witness record growth with year-to-date (YTD) rail volumes of around 379,000 TEUs (over 23% YoY) and GPWIS (general purpose wagon investment scheme) volumes of 12.3 MMT (over 44% YoY). The highest-ever monthly GPWIS volumes were recorded in November 2023 at 1.72 MMT.