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US investment bank Jefferies, which has initiated coverage on Adani Enterprises with a ‘buy recommendation, has forecast record annual EBITDA growth of 47 per cent over the next four years for the company’s airport business.
Airport play
Adani Airport Holdings, which is the most likely candidate for listing in the medium term, operates seven airports in the country, with an eighth on the way. “Airport is an attractive monopolistic business slated to benefit from the under-penetrated Indian aviation story, lucrative non-aero business (proxy consumer play), recent revision in aero tariffs at its select airports, rollout of city-side land development projects, and contributions from to-be-commissioned NMIAL (Navi Mumbai) Airport,“ a note from Jefferies stated.
The airports unit of the group has a 23 per cent share of the country’s total passenger traffic.
The first phase of Navi Mumbai airport, which is being developed to handle 90 million passengers annually, will be commissioned in March next year.
Airports generate revenue from aero and non-aero businesses. The aero business is regulated while non-aero business comes from commercial operations such as retail, car parking and other concessions and rentals. To grow its non-aero revenue, Adani Airport is targeting major digital investments and plans to build high-yielding businesses at its airports such as duty-free, advertising, ground transportation, lounges, fuel farm and cargo handling, said Jefferies.
The company also owns around 650 acres across its airports, which it can use for real estate projects, adding to its revenue. Jefferies said it can develop ‘aero cities’ with a mix of hotels, convention centres, retail, entertainment, healthcare facilities, logistics and commercial offices.
Adani Enterprises
Jefferies has set a one-year price target of ₹3,800 per share for Adani Enterprises, saying the company is an attractive play on the capex cycle theme and had successfully incubated many companies within the group.
It has forecast a trebling of the company’s EBITDA over the next four years, led by new businesses such as airports and green hydrogen. Adani Enterprises was riding on the tailwinds of new energy, sustainability, airports, infrastructure, digitalisation and import substitutions in India, it said.
As the group’s chief incubator, it has nurtured several companies such as Adani Ports and Special Economic Zone, Adani Power, Adani Energy Solutions, and Adani Wilmar, all of which are now listed and profitable companies. It is now incubating new businesses in airports, green hydrogen, data centres, roads and copper, which will also likely be demerged and listed as part of the value unlocking exercise.
Jefferies expects the company to spend $5-7 billion annually over the next four years as it builds its new businesses.
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