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Going from strength to strength

Adani Port and SEZ (APSEZ) reported adj. EBITDA of INR 37.5bn for 1QFY24, +14% YoY/+15% QoQ and 3% above JMFe (7% above Street estimates). Adjusted PAT was INR 20bn (assuming nominal 17% tax rate), up 9% YoY/21% QoQ (4% above JMFe/2% above Street estimates). Consolidated revenue grew 24% YoY to INR 58bn in line with JMFe, largely led by a) consolidation of Haifa and Karaikal ports, b) India port volume growth (+8% YoY;+5% YoY excluding Karaikal), and c) strong growth in Logistics (+41% YoY; EBITDA up 48% YoY). The management maintained its FY24 guidance on port volume (370-390mnt; 9%-15% YoY), revenue (INR 240bn-250bn), EBITDA (INR 145bn-150bn), and capex (INR 40bn-45bn). We broadly maintain our FY24/25EPS estimates and introduce FY26EPS. We maintain BUY rating with an SoTP-based Jun’24 TP of INR 920 (earlier Mar’24 TP of INR 850)

* 1QFY24 summary: Consolidated revenue grew 24% YoY/8% QoQ on the back of a) port revenue (+9% YoY/+12% QoQ), and b) logistics segment (+41% YoY/-5% QoQ; +29% 4-year CAGR) and was in line with JMFe. Adjusted for forex loss/gains, EBITDA was INR 37.5bn, +14% YoY/+15% QoQ and 3% above JMFe. The EBITDA beat translated to 4% beat at adjusted PAT level (INR 20bn, +9% YoY/21% QoQ)

* Port volume story intact: Port volume grew 12% YoY/17% QoQ to 101mnt (in line with JMFe) and was led by a) Krishnapatnam (+31% YoY), b) Dhamra (+13% YoY), and c) Haifa port consolidation (c. 3.2mnt). From a commodity perspective, container and other cargo (dry bulk+liquid) led the show (+9%/+29% YoY respectively) while coal grew at 2% YoY. While it maintained target of 500mnt for FY25, guidance of 370-390mnt for FY24 (28-32% YoY) implies a slightly cautious view on the volume front. It continues to be bullish about prospects and also said it has hiked prices by c.2-2.5% at the company level (effect to be reflected from July onwards).

* Logistics on uptrend: Rail volume increased 18% YoY to 131k TEU of which EXIM share was 90% and domestic was 10%. The company added two trains during the quarter to take the total count to 95 and has placed orders for 24 container and 13 bulk trains (to be delivered over the next 2 years). The company has commissioned Nagpur ICD and Ahmedabad ICD will be operational by Mar’24. Thus, rail volume is expected to grow at 20-25%. Further, the company currently has 5mn sq.ft. of warehouses under construction and plans to add 10mn sq.ft. every year to reach 60mn sq.ft.

* Maintain estimates; BUY: We broadly maintain our FY24/25 estimates and introduce FY26 estimates. We maintain BUY rating with an SoTP-based Jun’24 TP of INR 920 (earlier Mar’24 TP of INR 850). We value operational ports on DCF basis given the specific concession of the ports. We follow FCFF methodology assuming WACC of 11.8% with cost of debt at 10% and cost of equity at 14.1%. We maintain BUY. Any adverse development on group entities is a key risk to our call

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