Target: ₹1,410

CMP: ₹1,196.75

Adani Ports & SEZ (APSEZ) reported 42 per cent y-o-y growth in Oct-Dec’23 volumes, taking the total 9M-FY24 volumes to 311 MMT, registering a 23 per cent y-o-y growth on YTD basis.

With a monthly volume run-rate of about 35 MMT, management has increased volume guidance to 400 MMT in FY24 from 370-390 MMT earlier. We expect volumes for FY24 to even surpass the revised volume guidance of 400 MMT.

APSEZ’s management reiterated its focus to reach its FY25 port traffic target of 500MMT vs 339MMT in FY23. Management believes volume growth is unabated and it is expected to grow at 1.5x the GDP growth rate. Two of APSEZ’s ports are in India’s top 10 ports for its annual cargo volume in FY23.

APSEZ has consistently generated strong cash flow from operations (CFO) over FY18-23 (cumulative CFO of ₹43,300 crore at a CAGR of 16 per cent). APSEZ is India’s largest private port operator with more than 24 per cent market share in cargo handling.

We roll forward our estimates to FY26 and expect APSEZ to register 14 per cent volume growth over FY23-26 and revenue/EBITDA/PAT CAGR of 19/18/17 per cent over the same period. We reiterate our Buy rating with a revised TP of ₹1,410 based on 16x FY26E EV/EBITDA.