Adani Ports & SEZ Stock Research Report

Targets to double port volumes by 2029; setting itself to transform into a transport utility….

1. We visited the Vizhinjam Port of Adani Group and attended Adani Ports & SEZ (ADSEZ)’s analyst day. The management highlighted its focus on doubling its handled volumes over the next five years. The growth would be driven by Domestic ports, and volume guidance excludes any inorganic opportunities that come ahead. The logistics business is expected to ramp up significantly and would be a key driver in supporting the growth of port volume as the company increasingly provides endto end services to its customers. The company continues to deploy the latest technology across its operations to improve efficiency and reduce the turnaround time.
2. We believe the company is very well placed to continue to outpace industry growth and gain market share. The integration of the logistics business with the ports business is enhancing its service offerings and transforming the company into a transport utility. We reiterate our BUY rating with a TP of INR1,530 (29% upside).

Vizhinjam Port visit – Phase 1 gets completed; expansion on track for other phases

♦ Located in Vizhinjam, Kerala, ADSEZ is developing a deep-sea water port as India’s first Mega Transshipment Container Terminal. Phase 1 has recently been completed (capacity of 1m TEUs) while other phases are slated for completion by 2028, bringing the total capacity to 3m TEUs.
♦ The centrally located port is close to international shipping routes with a draft of 20-24 meters. The total investment in Phase 1 was INR90b (INR35b incurred by ADSEZ and others by the State and Central Government). In subsequent phases, the investments are expected to be much lower than Phase 1 on a per ton basis.
♦ While the port is expected to handle transshipment cargo for now, it would also subsequently handle EXIM volumes once rail and road connectivity gets operational.

Adani Ports & SEZ Stock Research Report:- Port volumes – Targets to double volumes by 2029

1.. ADSEZ handled 257.7mmt (+8% YoY) of cargo volumes over Apr-Oct’24. The growth was supported by containers, which rose 19% YoY, followed by liquids & gas (+9%). Despite disruptions due to the worker strike at Gangavaram as well as severe weather conditions in Mudra and Tuna, management continues to retain its volume guidance of 460-480mmt for FY25, with revenue projected to be ~INR300b.
2.. Further, ADSEZ targets to double its volumes handled to 1b tons by 2029. This would be mainly driven by Domestic port volumes (850m tons) and does not include any inorganic growth.
3.. ADSEZ is expected to record volume growth driven by market share gains and increased capacity at existing ports. The logistics business will serve as a value addition to the domestic port business with a focus on enhancing last-mile connectivity.

Recent acquisitions & development of ports to aid volume growth

♠ The Gopalpur Port began contributing to volumes in Oct’24, following the completion of its acquisition in the same month. Management sees considerable potential in Gopalpur, with Oct’24 volume figures showing strong initial results. This solid cargo flow positions Gopalpur as a valuable addition to the portfolio, enabling better access to natural resource opportunities along the East Coast.
♠ Similarly, the Vizhinjam Port began contributing to volumes in Oct’24, with full capacity utilization projected by FY26. Vizhinjam’s performance has already surpassed the initial expectations, with multiple shipping lines expressing interest in the port. As ADSEZ scales up and operates the automated terminal, the company’s efficiency is likely to improve, allowing it to accommodate more vessels.
♠ ADSEZ received the Letter of Intent (LoI) in Jul’24 to develop Berth 13 at Kandla, Gujarat, for the 30-year concession under the DBFOT model to handle clean cargo, including containers. The 300m berth, with a capacity of 5.7mmt, is set to be operational by FY27, expanding ADSEZ’s presence at Deendayal Port and boosting service to Gujarat and North India.

ADSEZ acquires a majority stake in a leading OSV operator

♣ ADSEZ has agreed to acquire an 80% stake in Astro for USD185m. The existing promoters of Astro will hold the remaining 20% stake.
♣ Founded in 2009, Astro is a leading global Offshore Support Vessel (OSV) operator with a fleet of 26 vessels, providing services across the Middle East, India, Far East Asia, and Africa. This acquisition supports ADSEZ’s goal to lead in marine operations and strengthen its presence in key regions while expanding its Tier-1 client base.

Adani Ports & SEZ Stock Research Report:- Building infrastructure for strong future growth in the logistics business

⇒⇒ As ADSEZ aims to become India’s largest integrated transport utility company by 2029, it is strengthening its capabilities in all logistics segments (ports, CTO, warehousing, last-mile delivery, ICDs, etc). Hence, it offers end-to-end services to its customers, thereby capturing a higher wallet share and making the cargo sticky in nature.
⇒⇒ Adani Logistics Ltd (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 nationwide presence by further developing logistic parks and warehouses.

Adani Ports & SEZ Stock Research Report:- Valuation and view

⇒ ADSEZ is likely 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 port and logistics business to drive growth.
⇒ We expect ADSEZ to report 10% growth in cargo volumes over FY24-27. This would drive a revenue/EBITDA/PAT CAGR of 15%/15%/21% over FY24-27. We reiterate our BUY rating with a TP of INR1,530 (premised on 16x Sep-26 EV/EBITDA).