Adani Ports gains 3%, hits new high on improved business outlook

Shares of Adani Ports Special Economic Zone (APSEZ) hit a new high of Rs 934, up 3 percent on the BSE in Monday’s intra-day trade. The stock has surged 10 percent in the past one week, and 19 percent in the past month on the back of an improved business outlook, and strong earnings in the June quarter of the ongoing fiscal (Q1FY23). In comparison, the S&P BSE Sensex was up 1 percent during the month.

Q1FY23 was the strongest quarter in APSEZ’s history, with a record cargo volume and the highest ever quarterly EBITDA. The company reported a record EBITDA of Rs 3,005 crore, up 11 percent year on year (YoY) on the back of revenue growth for the ports and logistics business.

The management had said the company continued this strong performance in July and recorded 100 MMT of cargo through-put in the initial 99 days of FY23, a feat never achieved before. However, the company’s consolidated revenue (excluding Gangavaram) was almost flat YoY at Rs 4,638 crore, given the Rs 725 crore decline in revenue from the SEZ business segment, it said.

“With APSEZ set to commission two new terminals in the coming months, this growth story will gain more momentum. The container terminal at Gangavaram Port will become operational in September, while the 5 MMT LNG terminal at Dhamra will be ready by December. This LNG terminal has a take-or-pay contract with a couple of O&G majors,” the company said.

“APSEZ is on track to meet its FY23 cargo guidance of 350-360mt with support from improved coal cargo volumes. APSEZ has maintained its CAPEX guidance of Rs 23,000 crore by FY25. While this CAPEX is supported by robust EBITDA (pre-fx MTM) of Rs 13,300 crore/Rs 15,300 crore in FY23E/FY24E, a rise in intensity is likely to restrict ROCE expansion,” analysts at Centrum Broking said in their result update report.

The recovery in the import of thermal coal volumes is one of the key catalysts for FY23 volume guidance. Besides APSEZ’s persistent cargo diversification efforts should aid incremental volumes in containers, LNG at Dhamra, and more dry and liquid cargo at key ports. New tie-ups should help container cargo recovery at Krishnapatnam, the brokerage firm said. The stock, however, is above its target price of Rs 920 per share.

Technical View
Bias: Positive
Support: Rs 912
Target: Rs 970

The has surged more than 43 percent from its June-end low of Rs 653 and is now treading around the higher end of the Bollinger Band on the weekly chart.

At the same time, the stock has managed to break out and sustain above the higher-end of the Bollinger Band on the daily chart during the last two trading sessions. This indicates that the short-term bias will likely remain bullish as long as the stock sustains above Rs 912. Whereas; the weekly chart shows sustenance above Rs 923 to provide fresh legs to the rally.

On the upside, the stock can potentially rally to the Rs 970-level, indicating the monthly Fibonacci chart. On the flip side, failure to sustain above the Rs 912-level could trigger a correction towards Rs 880-odd level. The significant support for the stock stands at Rs 850 – its 20-DMA.