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Centrum Broking
Adani Ports & SEZ (Buy)
CMP: ₹274.1
Target: ₹390
Adani Group (owns 63.05 per cent equity stake in Adani Ports & SEZ) in a release highlighted initiatives taken for capital and risk management. The Group also highlighted its resolve to further unwind borrowings against pledges and indicated that it does not intend to use this method of financing in future.
Valuation: APSEZ Adani Ports &SEZ has a strong portfolio of cash generating assets which offer scalability and sustained growth potential. Given its cargo stickiness with 60 per cent contracted cargo, APSEZ is partly safeguarded from near-term Covid-19 disruption and is well placed to capitalise when the growth recovers. With sustained realisations and margins and contribution from new assets, we expect the port EBITDA to grow at 15.8 per cent CAGR over FY20-22E.
There is a sustained effort to unwind related-party exposures by utilising proceeds from monetisation of investments in Group companies. We value APSEZ on SOTP basis valuing the ports and logistics businesses at 10x FY22E EBITDA. We have a ‘Buy’ recommendation on the stock with a SOTP based target price of ₹390.
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