On Wednesday, CLSA maintained its Outperform rating and INR1,764.00 price target on Adani Ports & Special Economic Zone Ltd. (ADSEZ:IN). The firm highlighted the company’s continued outperformance in traffic growth compared to the broader Indian ports sector.
Specifically, Adani Ports' flagship Mundra port saw an 18% year-over-year (YoY) increase in traffic in the first half of the fiscal year 2025, outpacing the 9% growth across all ports in India.
The analyst from CLSA noted that Adani Ports has been a robust proxy for the Indian economy's growth, with its core ports expanding traffic at three times the rate of Indian ports' traffic growth from fiscal year 2019 to 2024. This trend was sustained in the first half of fiscal year 2025, primarily driven by Mundra, the company's largest port.
The recent mergers and acquisitions strategy of Adani Ports was also recognized as successful, as the newly acquired Karaikal port achieved a second-quarter EBITDA margin close to that of Mundra.
In the second quarter, Adani Ports reported a 10% YoY increase in port traffic, led by a 12% YoY rise in container traffic. Dhamra Port was another highlight, with a 17% YoY volume growth.
The company also experienced a significant improvement in EBITDA margin, which climbed 344 basis points YoY in the second quarter, attributed to a favorable cargo mix and the depreciation of the Indian rupee.
The strong EBITDA and increased cash flow from operations contributed to reducing the company's leverage to a nine-year low, with net debt to EBITDA at two times. The CLSA analyst concluded the assessment of Adani Ports' performance by stating, "Solid Ebitda and rising cashflow from operations drove 1H leverage to a nine year low (net debt/Ebitda at 2x). O-PF."
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