Return Potential For This Top Adani Stock Upgraded To 78.2%, Aggressive Capex Incurred: ICICI Securities

Brokerage firm ICICI Securities is suggesting buying the stock of Adani Ports and Special Economic Zone Ltd. The company has planned to incur an aggressive capex of Rs. 20,000 over the forecast period FY22-25. This stock has fallen by 12.13% in the past 5 days, on weak global cues, making it available at a cheaper price for investors this week.

Stock To Buy: Target Price

The Current Market Price (CMP) of Adani Ports and Special Economic Zone Ltd. (APSEZ) is Rs. 913. ICICI Securities has estimated a Target Price for the stock at Rs. 1,628. This stock has the potential to give a 78.20% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 172,454 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 913
Target Price	Rs. 1,628
Potential 1 year return	78.20%
52 week high share price	Rs. 987.85
52 week low share price	Rs. 651.95

Financial performance

The company's sales in FY22 was recorded at Rs. 15,934 crore, which is expected to be at Rs. 19,889 crore in FY23. Their EBITDA in FY22 stood at Rs. 8,879 crore, which is expected to be at Rs. 9,547 crore in FY23. The company's Net Profit in FY22 was recorded at Rs. 4,728 crore, which is expected to be at Rs. 5,058 crore in FY23.

Stock Valuation: ICICI Securities

The firm said, "We have used the DCF model to value APSEZ. We have discounted back the future cash flows to FY25 and value the company at Rs. 1,628 per share, presenting an upside of 78.2% from the CMP of Rs. 913. APSEZ has become a cash generating machine which is expected to throw up Rs. 44,902.6 crore of operating cash flow in next 3 years which should help pare gross debt to Rs. 42,105.1 crore in FY25."

Revenue and volumes expectation from port business

"We expect the net revenues to grow at 23.4% CAGR over FY22-25E due to 23.1% CAGR in Port revenues from Rs. 11,977.0 crore in FY22 to Rs. 22,362.3 crore in FY25. 24.6% CAGR in logistics revenues from Rs. 1,208.0 crore in FY22 to Rs. 2,947.8 crore in FY25. 21.6% CAGR in Harbour services revenue from Rs. 1,797.0 crore in FY22 to Rs. 3,231.9 crore in FY25. Volumes in Port business are expected to grow at 16.9% CAGR to 498.4 MT We have modelled 16.9% volume CAGR from 312.4MMT in FY22 to 498.4 MMT in FY25. In terms of capacity utilization, we expect the overall capacity utilization to move from 55.6MMT in FY22 to 67.3 MMT in FY24," ICICI Securities mentioned.

Debt Levels To Fall

APSEZ with its "string of pearls" port strategy along with its end-to-end solutions of its logistic arm provides it with a significant competitive advantage that will ensure that APSEZ emerges as a substantial operating cash cow in the medium term. This is aptly demonstrated by the fact that we expect the debt levels to pare to Rs. 42,105.1 crore in FY25 (from Rs. 45,752.3 crore recorded in FY22) despite an aggressive capex of Rs. 20,000 that is to be incurred over the forecast period FY22-25. However we are cognizant of the fact that debt levels could potentially spike in case of a successful CONCOR bid.

APSEZ expects dominant position for policy like Make In India

In a world that is rapidly wanting to wean of China as a manufacturing hub, India is attempting to cash in on the emerging opportunity through a slew of policy reforms viz: Make In India, New Logistic Policy, PLI, FTAs and lower corporate tax on new enterprises. This should help spearhead EXIM trade and APSEZ by virtue of its dominant position is aptly poised to benefit from this, the brokerage firm thinks.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.