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In-line performance; outlook remains bright
* Adani Ports & SEZ (APSEZ) reported a revenue growth of 6% YoY to INR70.7b in 2QFY25 (in line). Ca

rgo volumes grew 10% YoY to 111mmt. The growth was primarily driven by containers (+19% YoY). In 1HFY25, APSEZ managed ~27% of the country’s total cargo and ~45% of container cargo. EBITDA margin came in at 61.8% (est. 59%), up 90bp YoY/240bp QoQ. EBITDA grew 13% YoY to INR43.7b (in line).

* APAT rose 11% YoY to INR24.6b (in line). During 2QFY25, port revenue grew 12% YoY to INR56.4b. Port’s EBITDA margin was 72% in 2QFY25 (flat YoY)

* Logistics revenues grew 22% YoY to INR5.9b. EBITDA margin in the Logistics business stood at 27% in 2QFY25 (30% in 2QFY24).

* Mundra recorded a volume of 50 MMT (+12% YoY) during 2QFY25. The share of non-Mundra domestic ports stood at 50% in 2QFY25. During 1HFY25, cargo volume grew 9% YoY to 220 MMT.

* During 1HFY25, revenue was INR140b (+9% YoY), EBITDA was INR86.1b (+13% YoY), EBITDA margin came in at 61.4%, and APAT was INR51b (+19% YoY). During 2HFY25, revenue, EBITDA, and PAT are expected to grow 20%, 16%, and 26% YoY, respectively.

* The 2Q performance was in line with our estimates. APSEZ is expected to record 1.5-2.0x of India’s cargo volume growth, driven by market share gains and increased capacity. Further, the logistics business will serve as a value addition to the domestic port business, with a focus on enhancing last-mile connectivity. We largely retain our estimates for FY25/FY26/FY27. We expect APSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a CAGR of 15%/15%/21% in revenue/ EBITDA/PAT over FY24-27. We reiterate our BUY rating with a revised TP of INR1,780 (premised on 18x on Sep-26 EV/EBITDA).

In-line performance led by strong growth in container cargo; volumes jump ~2x of industry in 1HFY25

* During the quarter, APSEZ clocked cargo volume of 111mmt (up 10% YoY), primarily driven by containers (up 19% YoY). In 2QFY25, APSEZ managed ~27% of the country’s total cargo and ~45% of container cargo.

* Mundra recorded quarterly volume of 50mmt (up 12% YoY), and EBITDA margin stood at 70% (vs. 65% in 1QFY24).

* The net debt-to-EBITDA ratio improved to 2x from 2.1x in Sep’24 despite a capex of INR40b in 1HFY25.

* APSEZ completed the Gopalpur Port acquisition and acquired an 80% stake in Astro Offshore, adding 26 offshore support vessels. Gopalpur Port will start contributing from 2HFY25.

Last-mile connectivity to bolster growth in the logistics business

* In 2QFY25, Adani Logistics (ALL) posted ~22% YoY growth in revenue and an EBITDA margin of 27% (30% in 2QFY24).

* Rake count has risen to 132 (with 68 for Container, 54 for GPWIS, 7 for Agri, and 3 for AFTO) from 127 at the end of FY24.

* 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 increased to 52% in 1HFY25 from 56% in 1HFY24.

* The company is targeting higher market share in key commodities (e.g., iron ore and fertilizer). India’s total port capacity is expected to reach 10,000 MTPA by 2047, from the current 2,500 MTPA.

? APSEZ completed the Gopalpur Port acquisition and acquired an 80% stake in Astro Offshore, adding 26 offshore support vessels. Gopalpur Port will contribute to 2HFY25 volumes.

* Vizhinjam Port will start contributing in Oct’24, with full capacity utilization expected only from FY26 onwards.

* Despite Middle Eastern geopolitical tensions, Haifa Port operates 24/7 with strong cargo volumes.

* As per the management, cargo volumes are expected to range from 460mmt to 480mmt in FY25, with EBITDA projected to be ~INR180b.

Valuation and view

*  APSEZ continues to gain market share while generating strong cash flows and maintaining its leverage position, with a net debt-to-EBITDA ratio of 2x as of Sep’24.

* We largely retain our estimates for FY26/27 and expect APSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a CAGR of 15%/15%/21% in revenue/EBITDA/PAT over FY24-27. We reiterate our BUY rating with a revised TP of INR1,780 (premised on 18x Sep-26 EV/EBITDA).

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