Adani Ports and Special Economic Zone Ltd’s stock trades at almost twice the price-to-earnings multiple of its Chinese counterparts, based on FY27 estimates. But this has not deterred brokers from making positive recommendations on the stock.
Antique Stock Broking Ltd initiated coverage of Adani Ports on Tuesday with a ‘buy’ rating and a target price of ₹1,773. The stock now trades at about ₹1,510.
There is general optimism about Indian port companies after China’s exports shrank in October, the first monthly contraction since March 2024, and Moody’s view that port companies in India will benefit from the China-Plus One manufacturing strategy. The other reason for the company-specific optimism could be Adani’s gradual expansion from a domestic port business to an international one and its transition to becoming an integrated logistics company.
To be sure, Adani’s domestic ports business could bring an upside surprise over the next few years if the management’s targets are met. Domestic ports remain the main earnings driver, contributing 85% of consolidated Ebitda in the September quarter (Q2FY26).
Revenue from overseas ports contributed 12% of the total and the segment’s Ebitda margin at 24% is much lower than 74% of domestic. The relatively lower margin was responsible for international ports’ low return on capital employed at 7% versus 24% for domestic ports.
Besides, Adani’s ports in Israel, Sri Lanka and Tanzania suffer from geopolitical risks. Recently, Tanzania had the worst post-election violence in decades. The Australia operations in the form of the North Queensland Export Terminal (NQXT) are small currently and may contribute about ₹1,400 crore to Ebitda in FY26, or about 7% of domestic Ebitda, and possibly less than 10% of Ebitda even by FY28.
Bet on expansion
Adani essentially remains a bet on domestic ports and the ability to expand rapidly. The management aims to achieve a total volume of 1,000 million tonnes by 2030/FY31, with 85% of it from domestic ports. That would mean doubling FY25’s volumes of 430 million tonnes or achieving a CAGR of 12%, which is similar to the 12.4% CAGR achieved in volumes over FY17-FY25, albeit on a higher base.
The bulk of the additional volumes will have to come from Mundra, where the capacity of 264 million tonnes is being expanded to 514 million tonnes eventually at a capital expenditure of ₹45,000 crore. This project will expand the port’s multi-purpose cargo handling capabilities including LNG in cryogenic ships.
The mega capital investment should also help Adani in negotiating the renewal of the existing concession agreement with the Gujarat government that ends in 2031 after a 30-year term.
Though the management has said that the port concession renewal will be sorted out well within time that reduces the business continuity risk, there are other threats for the domestic port business. For instance, Operation Sindoor had affected Mundra port’s volumes in Q1FY26. Mundra port also suffers owing to the ban on the entry of any vessel sanctioned by the US, the UK, the EU or the UN.
Notwithstanding these risks, Antique’s target price of ₹1,773, corresponding to an EV/Ebitda of 15x based on FY28 estimates seems to have factored in some conservatism, going by its assumptions. Although the valuation multiple is in-line with the five-year historical average, the brokerage’s Ebitda projections have been made assuming 8.5% CAGR in domestic port volumes versus the management’s goal of 12% CAGR. The past track record of growth puts the odds in favour of the management.