Buy Adani Ports & SEZ Ltd For Target Rs.1,400 by Motilal Oswal Financial Services Ltd
Performance broadly in line; FY25 EBITDA guidance raised
* Adani Ports & SEZ (APSEZ) reported a revenue growth of 15% YoY to INR79.6b in 3QFY25 (our estimate was INR75b). Cargo volumes grew 4% YoY to 113mmt. The growth was primarily led by containers. In 9MFY25, APSEZ managed ~27.2% of the country’s total cargo and ~45% of container cargo.
* EBITDA margin came in at 60.3% in 3QFY25 vs. our estimate of 58.6% (-20bp YoY, -150bp QoQ). EBITDA grew 15% YoY to INR48b (9% above our estimate), while APAT increased 14% YoY to INR26.7b (in line).
* During 3Q FY25, Port revenues grew 8% YoY to INR59.9b. Port EBITDA margins stood at 73% in 3Q FY25 (+200bp YoY). Logistics revenues grew 31% YoY to INR6.9b. EBITDA margins in the Logistics business stood at 23% in 3Q FY25 (28% in 3QFY24).
* During 9MFY25, Revenue was INR 220b (+11% YoY), EBITDA was INR 134b (+13% YoY), EBITDA margin came in at 61%, and APAT was INR 78b (+17% YoY).
* Management has raised its FY25 EBITDA guidance to INR188-189b (vs. previous guidance of INR170-180b). It has reiterated its FY25 cargo volume guidance of 460-480 MMT.
* APSEZ’s 3QFY25 performance was in line and the company is projected to grow at 1.5-2.0x India’s cargo volume, driven by market share gains and capacity expansion. Additionally, its logistics business will enhance last-mile connectivity, adding value to domestic port operations. We largely retain our estimates for FY26/FY27. We expect APSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a CAGR of 14%/15%/19% in revenue/EBITDA/PAT over FY24-27. We reiterate our BUY rating with a revised TP of INR1,400 (premised on 15x on Sep-26 EV/EBITDA).
In-line performance led by strong growth in container cargo; new ports to add to volume growth in 4Q
* During the quarter, APSEZ clocked a cargo volume of 113mmt (up 4% YoY) and 332mmt in 9MFY25 (+7% YoY), driven by growth in containers (+19% YoY), liquids and gas (+8% YoY), and dry bulk cargo, partially offset by a decline in imported non-coking coal.
* APSEZ strengthened its presence along the Eastern coast with a 95% stake acquisition in Gopalpur Port and expanded into the global marine services market with an 80% stake in Astro Offshore.
* APSEZ remains on track to commission the Colombo Port by 2026, with trial volumes expected in 4QFY25. Growth will be further driven by new volumes from Vizhinjam, Gopalpur, and Tanzania ports, with Vizhinjam now commercially operational and the other two expected to handle ~1 MMT monthly from Jan’25.
Last-mile connectivity to bolster growth in the Logistics business
* In 3QFY25, Adani Logistics (ALL) posted ~31% YoY growth in revenue and an EBITDA margin of 23% (28% in 3QFY24).
* The rake count has risen to 132 (with 68 for Containers, 54 for GPWIS, 7 for Agri, and 3 for AFTO) from 127 at the end of FY24.
* APSEZ launched Trucking Management Solution (TMS), a tech-driven platform to streamline supply chains through marketplace and fulfillment services. EBITDA margin for the Trucking business will be ~10%.
* ALL expanded its services to cover container train operations, container handling in logistic parks, and warehouses offering storage and trucking solutions. With 12 multi-modal logistics parks, 132 trains, 3.1m sq. ft. of warehousing space, and 1.2mmt of grain silos, ALL aims to establish a nationwide presence by further developing logistic parks and warehouses
Highlights from the management commentary
* The proportion of non-Mundra domestic ports in the overall cargo distribution stood at 53% in 9MFY25, from 56% in 9MFY24.
* APSEZ remains on track to commission the Colombo port by 2026 and expects trial volumes in 4Q.
* New volumes from Vizhinjam, Gopalpur, and Tanzania ports will further boost growth. Vizhinjam port commenced commercial operations post-extensive trials. Tanzania and Gopalpur ports are expected to handle ~1 MMT of monthly volumes from January 2025
* During FY25, cargo volumes are expected to range from 460mmt to 480mmt, with revenue projected to be between INR290b and INR310b. The company has raised its EBITDA guidance for FY25 to INR188-189b (earlier guidance was INR170-180b) with a net debt-to-EBITDA ratio of 2.2-2.5x.
Valuation and view
* APSEZ is anticipated to outpace India's overall growth, driven by a balanced port mix along India's western and eastern coastlines and a diversified cargo mix. The company continues to invest heavily in the ports and logistics business to drive growth. The commencement of operations at Gopalpur and Vizinjham Ports will enable the company to further boost volumes.
* We broadly maintain our estimates for FY26/27 and expect APSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a CAGR of 14%/ 15%/19% in revenue/EBITDA/PAT over FY24-27. We reiterate our BUY rating with a revised TP of INR1,400 (premised on 15x Sep-26 EV/EBITDA).
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