Jefferies has a 'Buy' rating on two Adani group stocks - Adani Transmission and Adani Ports SEZ. Adani Transmission said the distribution amendment bill could be a key beneficiary of the distribution amendment bill if it comes through, adding that Medium-term double-digit growth for Adani ports should continue as it replicates the Mundra market share gain story at its acquired ports.
In the case of Adani Ports, Jefferies said the company is India's largest port operator with a dominant 22 percent market share. The management is seeking to leverage its strong balance sheet to benefit from gradual volume recovery as global container rates ease. It's also looking to grow in logistics warehousing to offer customers end-to-end solutions, Jefferies said. Adani Ports' performance is still strong, with market share moving up to 22 per cent from 14 per cent in FY15, and expected to be 31 per cent by FY25 E. The company's core port EBITda growth remains upward of double digits, backed by volumes, we remain positive on the stock. Our Rs. 800 price target is based on 13 times September 24 E EV Ebitda and discount to the historical mean vs. inline earlier, it said.
Incumbent negative news flows on group leverage and disappointed market share gain at acquired ships are among the risk factors for downside risks.
Adani Transmission is India's only private-sector listed company on the transmission and distribution sector, Jefferies said. TBCB bids for transmission are now the largest private-sector player with a market share of 22 per cent. B 2 C interface is rising with access to 12 milion-plus consumers in the Mumbai distribution business, it added, while adding that the debt: equity is being comfortable for an asset business at 3: 1.
The objective of the capital management program is to reduce volatility in interest costs, apart from reducing it. If it is passed, key beneficiary of the distribution amendment act. We have a buy rating on the stock, it said, while suggesting a range of Rs. 3275 to Rs. 3275 on the stock.
Jefferies said its price target for Adani Transmission factors cost of equity of 12 per cent, long-term debt at 8 - 8.8 per cent current 8 - 8.8 per cent range with a terminal growth of 6 per cent. The increase in transmission spend reflects pick-up in transmission spend and potential growth from the distribution amendment act.