Should you invest in Adani Ports after a 3.8-fold rise in Q4 net profit?

Shares of the country’s largest integrated logistics player Adani Ports and Special Economic Zone (APSEZ) tanked around 4.5% after the company reported a 288% jump in consolidated net profit to Rs 1,321 crore for the fourth quarter ended March 31, 2021 compared to Rs 340.21 crore in the corresponding period of the previous fiscal.

Its March-quarter consolidated revenue from operations rose almost 24% to Rs 3,608 crore as against Rs 2,921 crore a year ago. In 2020-21, total operating revenue grew by 6% to Rs 12,550 crore from Rs 11,873 crore in the preceding fiscal. Port revenue also increased by 12% to Rs 10,739 crore on account of an 11% growth in cargo.

Here’s what brokerages have to say about the stock after the March earnings:

Antique Stock Broking | Target Price: Rs 865 (raised from Rs 790) | Upside: 13%

APSEZ spreading its presence where it wasn’t present earlier, like the states of AP and Maharashtra via the acquisition of Krishnapatnam, Gangavaram & Dighi Port. The company is also going to add a presence in Sri Lanka market post the recently signed deal. All this without a material deterioration in the Balance Sheet position, as Net Debt/EBITDA is targeted to remain in 3-3.5x range. Post 4Q, we tweak FY22/FY23 EBITDA estimates (adjust share count) to incorporate recent acquisitions i.e. 25% pending stake in Krishnapatnam, majority stake in Gangavarm and Rail assets of SRCPL. The price target of Rs 865, implying an exit FY23 EV/EBITDA of ~15x. The company continues to be a compelling story on India’s export-import play with leadership position, strong margin profile and cash flow generation.

Kotak Institutional Equities | Target Price: Rs 825 (reduced from Rs 840) | Upside: 7%

APSEZ ended an eventful FY2021 with marked outperformance, healthy cash flow generation, an improved cost structure and entry into new markets that obviate growth fatigue for the next decade. The incremental focus would be on growing the logistics business, which would also help enhance growth prospects and customer stickiness for the mainstay ports business over time. We lower our FY2023E EBITDA by 5% and factor in 100% stake in KPCL, yielding a 2% lower FV of Rs825.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing)