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In-line performance; well placed to surpass volume guidance of FY24

* Adani Ports & SEZ Ltd (APSEZ) reported a revenue growth of 45% YoY to INR69.2b in 3QFY24 (in line). During the quarter, APSEZ recorded ~44% YoY growth in cargo volumes to reach 108.6 MMT.

* EBITDA margin came in at 60.5% in 3QFY24 vs. our estimate of 59.5% (down 240bp YoY, up 210bp QoQ). While EBITDA grew 39% YoY to INR41.9b, APAT increased 52% YoY to INR23.5b (our estimate was INR 21.1b).

* In 3QFY24, Port revenues grew 41% YoY to INR55.4b. EBITDA margins in the Ports business stood at 71% in 3QFY24 (70% in 3QFY23). Logistics revenues grew 8% YoY to INR6b. EBITDA margins in the Logistics business stood at 28% in 3QFY24 (29% in 2QFY23). During 9MFY24, revenue increased 32% YoY to INR 198b, EBITDA increased 24% YoY to INR 118b, and APAT stood at INR 66b (+19% YoY).

* APSEZ reported a robust 9MFY24 by handling 311 MMT of cargo volume in the period. The management recently revised its FY24 cargo volume guidance to 400 MMT from ~380 MMT earlier. Further, through debt reduction, APSEZ has achieved its net Debt to EBITDA target of 2.5x, well ahead of its given timeline and aspires to sustain this level in the future.

* APSEZ has a diversified cargo mix along with sticky cargo and customer base. The operational ramp-up at the recently acquired ports is expected to drive a 14% growth in cargo volumes over FY23-26. This would drive a revenue/EBITDA/PAT CAGR of 19% over FY23-26. We marginally increase our estimates with improved growth outlook and reiterate our BUY rating with a revised TP of INR1,470 (premised on 16x FY26E EV/EBITDA).

APSEZ records highest-ever cargo volume in 9MFY24, led by its flagship port at Mundra

* On YTD basis (Apr-Dec’ 23), APSEZ has handled 311 MMT of total cargo, up 23% YoY. EBITDA margin of the domestic port business improved 200bp to 72% in 9MFY24 vs. 70% in 9MFY23.

* APSEZ’s market share in India stood at ~25% in Dec’23. APSEZ’s domestic cargo volumes growth in 9MFY24 was over ~2.5x India’s cargo volume growth rate. Nine of the company’s domestic ports recorded their highestever cargo volumes in 9MFY24.

* APSEZ is focused on expanding its footprint in the existing ports and diversifying the cargo base within these facilities.

Logistics business well placed for faster growth ahead

* In 3QFY24, Adani Logistics Ltd (ALL) registered an ~8% YoY growth in revenue and EBITDA margins of 28% (29% in 3QFY23).

* ALL currently operates 11 multi-modal logistics parks (MMLPs), equipped with 116 trains, 2.4m sq. ft. of warehousing space, and 1.1mmt of grain silos. ALL plans to expand its footprint and build a pan-India presence in the form of logistic parks and warehouses.

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