Macquarie Highlights Adani Ports' Potential in India's Growth, Assigns 'Outperform' Rating

Synopsis

According to a report by Macquarie Equity Research, Adani Ports and Special Economic Zone Ltd (APSEZ) is well-placed to harness India's long-term growth potential, earning an 'outperform' rating as it aligns with national development themes.

Key Takeaways

APSEZ is poised for long-term growth.
Macquarie assigns an 'outperform' rating.
The company targets a 40-45% CAGR in logistics revenue.
APSEZ aims to double the growth rate of India's cargo volume.
Significant capital investment planned for expansion.

Ahmedabad, March 11 (NationPress) Adani Ports and Special Economic Zone Ltd (APSEZ) is strategically positioned to leverage India's long-term growth potential due to its business alignment with the country's development themes, according to a report from Macquarie Equity Research, which has assigned the leading ports operator an ‘outperform’ rating.

Macquarie noted that the Adani Group company provides a diversified mix of ports and cargo, enhancing resilience, while the increasingly integrated logistics offerings are expected to foster stronger customer retention.

The visibility of sustainable operating cash flows remains robust, bolstered by its cargo mix and customer collaborations. Macquarie stated, “Initiate at Outperform.”

“We are optimistic about APSEZ's long-term growth prospects, backed by its diversification strategies, execution capabilities, and expansion plans, which are further supported by strong operating cash flow (OCF) generation. Current valuations appear attractive,” the global financial institution mentioned.

Adani Ports stands out as India’s largest port operator, aiming to expand at double the pace of the country's cargo volume.

Macquarie believes that the variety of handled cargo, the strategic locations of its ports, hinterland connectivity, customer relationships, and its early-mover advantage are all advantageous factors.

The network effect of a swiftly expanding logistics business further bolsters this outlook. The management has set a target for the logistics sector (including inland transport, warehousing, etc.) to achieve a revenue CAGR of 40-45 per cent from FY25-29, it noted.

The firm reported its highest-ever monthly cargo volume of 39.9 million metric tonnes (MMT) in January, reflecting a 13 per cent year-on-year increase. It plans a capital expenditure of Rs 800 billion over FY25-29 to support organic domestic business growth (in contrast to Rs 420 billion over FY15-24).

This investment includes Rs 450-500 billion for domestic ports and Rs 200-250 billion for logistics. APSEZ is also considering opportunities for international port expansion. By 2030, it aims to reach 800-850 MMT in domestic cargo volume, which translates to an 11 per cent domestic cargo CAGR from FY24-FY31, according to Macquarie.

APSEZ's average OCF/EBITDA ratio has been 75 per cent during FY20-24. The brokerage anticipates that cash flow generation will remain robust due to a 50 per cent stable cargo mix and ongoing diversification efforts.

APSEZ Mundra achieved a landmark monthly cargo volume of 17.20 million metric tonnes in January, exceeding its previous record of 17.11 million metric tonnes, marking the highest ever recorded by any Indian port throughout maritime history.