Shares of Adani Ports and Special Economic Zone Limited (APSEZ) gained over 3 per cent on Tuesday’s session after tumbling by almost 5 per cent on Monday due to concerns about conflict in Israel, where the company owns a key port.
Adani Ports share price opened at an intraday low of Rs 799.95 apiece on BSE. Adani Ports & SEZ share price touched an intraday high of Rs 817.
Analysts indicated that even in the worst case, the impact of events in Israel would be low on Adani Ports & Special Economic Zone, which led to the upward trend of the Adani Ports stock price.
The domestic brokerage firm has assigned a target price of Rs 1,010, implying an upside potential of 28 per cent from the October 9 closing price.
Motilal Oswal analysts said that over the years, Adani Ports has evolved into the country’s largest private port operator with more than 24 per cent market share in cargo handling, spanning 14 ports across India. In 2011, Adani Ports operated just two ports Mundra and Dahej.
“Improved reach, strategic port locations, operational efficiencies, and comprehensive integrated service offerings (logistics and SEZ) have contributed to APSEZ’s remarkable growth, with volumes soaring to more than four times the levels recorded in FY11,” the brokerage said.
Adani Ports said in an exchange filing on Monday that it is closely watching the crisis in Israel and is ready with a business continuity plan.
“We are closely monitoring the action on ground which is concentrated in South Israel, whereas Haifa port is situated in the North. We have taken measures to ensure safety of our employees and all of them are safe. We remain fully alert and prepared with a business continuity plan that will enable us to respond effectively to any eventuality.
The overall contribution of Haifa in APSEZ’s numbers is relatively small at 3 per cent of the total cargo volume. For the current financial year (Apr 23-Mar 24), we have guided for Haifa Cargo volumes range of 10-12 MMT and APSEZ’s total cargo volume guidance of 370-390 MMT. In the initial six months (Apr-Sep 23), APSEZ’s total cargo volume was about 203 MMT, of which the Haifa share is about 6 MMT. We stay confident of APSEZs business performance,” the company said in its filing.
Other Adani group stocks today were also trading in green. Shares of Adani Enterprises, Adani Power, Adani Energy Solutions, Adani Green Energy, Adani Total Gas, Adani Wilmar, ACC, Ambuja Cements, and NDTV gained about 0.5 per cent to 3 per cent on Tuesday’s trade.
Let’s look at what the brokerages have to say regarding the impact of the Israel conflicts on Adani Ports.
A 5 per cent decline in the share price of Adani Ports & SEZ due to war concerns, according to international brokerage CLSA, gives an even greater opportunity to purchase this important asset with long-term concessions across India, as Haifa Port only contributes 1.3 per cent.
“We believe due to the Israel conflict potentially hurting its newly-acquired Haifa port. ADSEZ acquired the Haifa Port Co. (HPC) in Israel’s privatisation efforts via a 70:30 JV with Gadot Group at an EV of US$530m. HPC is a profit-making port focused on bulk and containers, with scope for operating leverage by reducing employee costs, per its retirement plan, and long-term real estate development upside. HPC accounted for 3 per cent to ADSEZ’s 1HFY24 volume and it expects a pay-back of 4/6 years under base case/worst case scenarios,” CLSA said in its report.
The global brokerage has a ‘buy’ rating on the stock with a price target of Rs 878, and sees potential upside of 11 per cent from the market price of Rs 789.90.
The domestic brokerage has a ‘buy’ rating on the stock with price target of Rs 1,010 and sees 28 per cent potential upside for the stock from the current market price of Rs 790.
“We initiate coverage on the stock with a BUY rating and a target price of Rs 1,010 (premised on 15x FY25E EV/EBITDA, in line with its historical average of 14x). The company’s: a) market leadership in the ports segment, b) focus on value-added areas such as logistics, and c) focus on strategic acquisitions place it in a sweet spot.
In FY23, Adani Ports has acquired 70 per cent stake in Israel’s Haifa Port in consortium with Israel’s Gadot Group for a consideration of $1.2 billion. Haifa is one of Israel’s two biggest commercial ports and handles nearly half of Israel’s container cargo,” the brokerage said in its report.
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