Target Price : ₹1,813
CMP : ₹1,269.05
Adani Ports and SEZ will continue to focus on growing organically in the domestic market by increasing market access (via expanding port capacity, investing in logistics and land development) and market penetration (digitalising value chain, technology-led cost efficiencies and green operations) even as it maintains its market share.
This is what came to fore from our interactions with the management when we visited ADSEZ’s Vizhinjam port.
Even in the absence of M&A activity (which drove volume in FY14-24), ADSEZ is confident of achieving 12 per cent domestic port volume CAGR in the next five years.
In the past decade, capex and acquisition spends accounted for ₹86,600 crore (85 per cent of this was funded via cashflow from operations). In the next five years, ADSEZ targets an organic capex of ₹75,000-80,000 crore, debt repayment of ₹27,100 crore and against this, expects cashflow to be much higher at ₹1,20,000 crore. This leaves room for value-adding M&As, de-leveraging (H1FY25 net Debt/EBITDA at 2x) or equity action (buyback/dividends).
Given ADSEZ’s leadership and operational efficiency, it will remain a dominant beneficiary of growth in Ports, with capex plans being funded via a mix of debt and internal accruals to sustain healthy net debt-EBITDA ratio at over 2.5x. Expect FY24-27 revenue/EBITDA/PAT CAGRs of 14/14/22 per cent .
