Adani Stocks Fundamental Analysis: Why Cash-Cow Adani Ports Share Is Special For Buying?

Despite an overwhelming 2023 due to scandals and controversial allegations by Hindenburg's report, there were two Adani stocks in the port-to-power empire of India's second-richest man Gautam Adani, who defied the bears mightily. One such would be the conglomerate's Adani Ports which has given double-digit returns in 2023, outperforming even benchmarks and its sibling stocks. Adani Ports is the cash cow of the group with huge block deals by global funds in the year, and this Adani stock is still attractive 2024 for buying.

On BSE, Adani Ports' share price gained marginally to end at Rs 1,024.15 apiece on the last day of 2023 (December 29). The company's market cap stood at Rs 2,21,230.63 crore.

Overall, in 2023, the stock has zoomed by 24.53% on BSE compared to double-digit declines of some of the major Adani shares due to the Hindenburg saga.

Why Adani Ports is a special pick for 2024?

While recommending to buy, HDFC Securities said Adani Ports will be able to capture a higher market share and also make cargo sticky. The company's Mundra port has completed 25 years of operations and also achieved a milestone by becoming the first port in the country to handle cargo volumes over 16 MMT in a month.

Currently, Adani Ports is the largest commercial port operator in India with a 26% share of port cargo movement in India. The company has evolved from a single port dealing in a single commodity to becoming an integrated logistics platform. The company operates 14 domestic & 2 international ports. APSEZ is strengthening its capabilities in all logistics segments (ports, CTO, warehousing, last-mile delivery, ICDs, etc).

Notably, in the first half of FY24, the company's domestic cargo volume growth was over 2x India's cargo volume growth rate. Also, eight of the company's ports achieved record-breaking half-yearly cargo volumes.

Additionally, the company's logistics business - Logistics rail recorded a volume growth of 25% Y-o-Y to 279,177 TEU and GPWIS cargo volumes grew by 42% Y-o-Y to 8.92 MMT. Also, the company has increased its total warehousing capacity during H1FY24 to 2.4 Mn Sq. Ft. by addition of warehouses in NRC and Indore.

Meanwhile, the company has also received a funding commitment of USD 553 Million from the US International Development Corporation (DFC) for their under-construction port in Sri Lanka.

Further, HDFC Securities pointed out that Adani Ports consolidated operating revenue of the company in H1FY24 grew by 26% Y-o-Y to Rs 12,894 crores. The company has also reported a massive increase in consolidated EBITDA by 49% Y-o-Y to Rs 7,429 crores (this includes forex impact). Ports business EBITDA margin expanded by 220 bps to 72% with improved realization and operating efficiencies.

Moreover, APSEZ has concluded a buy-back of two tranches of USD-denominated bonds totalling USD 325 Mn, representing 50% of the principal repayment due on July 24. Net Debt to EBITDA for TTM Sep'23 improved to 2.8x versus 3.1x for the full year ended Mar'23.

However, the brokerage also highlighted key concerns for Adani Ports. These are -- though the company's gross debt has reduced from Rs 49,800 crores in Mar'23 to Rs 47,200 crores in Sep'23 the number is still huge. The company has more debt in its books in the form of Foreign Currency Long-term debts, which results in a risk of MTM loss of foreign exchange fluctuations, However, the company states that the majority of its liabilities are naturally hedged against its revenue which are denominated and based on foreign currency. Any material slowdown in the macro economy or EXIM trade can slow down the company's performance.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.