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Adani Port and SEZ (APSEZ) reported broadly in-line EBITDA performance in 2QFY24 (EBITDA stood at INR 38.81bn, +19% YoY/+3% QoQ and 3% above consensus). Consolidated revenue grew 24% YoY to INR 66bn (+28% YoY, 3%/7% above JMFe/ Consensus) largely led by a) consolidation of Haifa and Karaikal ports, b) India port volume growth (+13% YoY; in line with JMFe), and c) strong growth in Logistics (+34% YoY; 3% above JMFe). Blended realisation was flat YoY (+3% QoQ). Adjusted PAT was INR 20.7bn (assuming nominal 17% tax rate), up 13% YoY/1% QoQ (in line with JMFe and consensus).The management indicated expectation of higher end of the range on its guidance of volume (370-390mnt), revenue (INR 240bn-250bn) and EBITDA (INR 145bn-150bn). The company categorically mentioned a) absence of any material inter-corporate deposits (ICD) transactions, and b) reduction in capital advances for projects. Moreover, its JV in Sri Lanka has secured funding commitment of USD 553mn from US International Development Finance Corporation (DFC), signifying the strength of the investment. We broadly maintain our FY24-FY26EPS estimates and now value APSEZ at 14x EV/EBITDA (basis 3-year/5-year median of 14.2x/13.7x respectively) and arrive at a Dec’24 TP of INR 1,140 (earlier Jun’24 TP of INR 920 on DCF basis). We maintain BUY.

* 2QFY24 summary: Consolidated revenue grew 28% YoY/6% QoQ on the back of a) port revenue (+13% YoY/+2% QoQ), and b) logistics segment (+34% YoY/-5% QoQ; +17% 4-year CAGR) and was 3% above JMFe. Adjusted for forex loss/gains, EBITDA was INR 38.8bn, +19% YoY/+3% QoQ and in line with JMFe. The company has adopted a new tax regime for its subsidiary, resulting in MAT credit write-off of INR 4.55bn (non-cash expenses) as the new tax regime is a superior proposition. Adjusted net profit (assuming normal tax rate of 17%) grew 13% YoY to INR 20.7bn (+13% YoY, +17% 4-year CAGR) and was 1% above JMFe.

* Port volume growth on track: Port volume grew 13% YoY/flat QoQ to 101.2mnt (in line with JMFe) and was led by robust growth in Mundra (+15% YoY), Dhamra (+18% YoY), and Hazira (+17% YoY), and Haifa port consolidation (c. 3.1mnt). From a commodity perspective, container and other cargo (dry bulk+liquid) led the show (+16%/+30% YoY respectively) while coal grew at 2% YoY. Port EBITDA grew 18% YoY to INR 36.2bn (+3% QoQ, 2% above JMFe). While it maintained its target of 500mnt for FY25, the company indicated the higher end of its earlier 370-390mnt guidance on volume for FY24. We estimate APSEZ to overshoot its guidance in FY24.

* Logistics on uptrend: Rail volume increased 32% YoY to 147k TEU in 2QFY24 as compared to 14% growth in Indian Railways’ container volumes (EXIM mix at 90% for APSEZ). During 1HFY24, the company added 11 container trains, of which nine trains were added during 2Q, taking the total count to 104 (50 containers, 44 GPWIS, seven Agri and three AFTO). Total warehousing capacity during 1HFY24 increased to 2.4mn sqft with the addition of warehouses in Mumbai and Indore.

* Maintain estimates; BUY: We broadly maintain our FY24-26 EPS estimates and now value APSEZ at 14x EV/EBITDA to arrive at a Dec’24 TP of INR 1,140 (earlier Jun’24 TP of INR 920 on DCF basis). Our target multiple is based on its historical 3/5-year median (1-year forward EV/EBITDA multiple) of 14.2x/13x respectively. We maintain BUY. Any adverse development on group entities is a key risk to our call.

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