Kotak Institutional Equities has upgraded its rating on Adani Ports and Special Economic Zone from “add” to “buy”. The research firm cites attractive valuations and a strong and resilient play on the remunerative ports business as reasons for the upgrade. Adani Ports and Special Economic Zone is one of the largest port operators in India and this upgrade is expected to drive the share prices of the company.
The recent fall in stock prices has led to Adani Ports trading at a lower multiple of 10 times the enterprise value-to-operating profit (EV/EBITDA) estimate for FY25, compared to its 1-year forward trading range of 10-16 times, according to the brokerage. The upgrade is based on the belief that Adani Ports’ strong market position, diversified revenue stream, and resilient business model make it a strong investment opportunity. Adani Ports is one of India’s largest private multi-port operators and has a strong presence in the country’s western and eastern regions.
Adani Ports is expanding its presence in the logistics value chain and gaining market share in the rail transportation business. It now has 38% market share at Mundra port compared to 52% in the past four years. The company is also a contender for acquiring the government’s stake in Container Corp, due to its growth ambitions in logistics, adjacent ports offerings, and large balance sheet and benign leverage. The Supreme Court also cleared the way for Adani Ports to bid for major port projects, and they have recently added assets in Haldia and Tajpur and also Karaikal Port.
The stock of Adani Ports saw its biggest single-day drop in nearly 3 years and hit a nearly 2-year low of Rs 537 on the NSE, despite the rating upgrade and positive outlook from Kotak Institutional Equities. The reason for the sell-off was the negative report from US-based Hindenburg Research, which accused the Adani Group of corporate misgovernance, stock price manipulation, and high-leverage risks.