Stock Performance, Financial Results, and Investment Considerations

Adani Ports’ stock price witnessed a decline of over 1% despite a 5% increase in its net profit during the fourth quarter. Investors may wonder whether it is the right time to buy, sell, or hold Adani Ports shares. Over the past month, the stock has shown a positive trend, rising by 6.6%. However, it has experienced a significant drop of 17% in the last six months. In a positive move, the company’s board declared a dividend of Rs 5 (250%) per equity share for the fiscal year 2023.

Despite a rise in net profit by 5.1% to Rs 1,158.88 crore compared to Rs 1,102.61 crore in the same period last year, Adani Ports and Special Economic Zone’s share price declined by 1.23% to Rs 725. The company’s revenue from operations witnessed a notable increase of 40% to Rs 5,796.85 crore in Q4FY22 from Rs 4,140.76 crore. Looking at the recent performance, the company’s shares have shown a positive trend over the past month with a growth of 6.6%. However, over the last six months, they have declined by nearly 18%.

Given this scenario, investors may be wondering about the appropriate course of action for Adani Ports stock. According to Kotak Institutional Equities, it is advisable to buy the stock, with a fair value estimate of Rs 835, representing a potential upside of 15.17%. Analysts at Kotak highlighted that ADSEZ’s results were in line with expectations, even after adjusting for the Haifa consolidation. Notably, the company has managed to maintain a net debt to EBITDA ratio of approximately 3X year on year, despite significant investments made in FY2023. Projections indicate healthy mid-teens growth in FY2024, along with a material decline in the net debt to EBITDA ratio to 2.5X. Kotak has slightly adjusted its estimates and increased the fair value estimate from Rs 810 to Rs 835 based on roll-forward analysis. The brokerage maintains a high cost of equity (CoE) of 14% and will monitor progress on the reduction of cash flow items associated with ICD (Inter Corporate Deposits) and outstanding security deposits given to EPC contractors against capital commitment.

In conclusion, Adani Ports’ share price experienced a decline despite positive financial results. Investors contemplating their actions regarding Adani Ports stock may find Kotak’s advice relevant. It suggests buying the stock with a fair value estimate of Rs 835, indicating a potential upside of 15.17%. Monitoring the reduction in cash flow items linked to ICD and outstanding security deposits will be crucial moving forward.

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