Best Ports Stock: Adani Ports vs JSW Infrastructure

In FY23, the major ports in India handled the highest-ever cargo of 795 million tonnes, posting an impressive growth of over 10% year-on-year (YoY).

This momentum is expected to continue for the next few years, driven by growing global trade and high demand for imports.

India, having the advantage of a vast coastline of 7,500 kilometres (km), is planning to benefit from this growth by increasing its cargo handling capacity to 10,000 million tonnes per annum (MTPA) from the current 2,600 levels.

Two dominant players in this industry that stand to benefit from this are Adani Ports and Special Economic Zone (APSEZ) and JSW Infrastructure.

Let's compare both companies on various parameters to see which one is better.

Business Overview

#Adani Ports and SEZ

Adani Ports is the largest commercial port operator in India, accounting for nearly one-fourth of the cargo movement in the country.

Its presence across 13 domestic ports in seven maritime states is the most widespread national footprint with deepened hinterland connectivity.

Through its subsidiary, Adani Logistics, APSEZ operates six logistics parks in Haryana, Punjab, Rajasthan, Maharashtra, and Karnataka.

The company has grown and expanded inorganically by acquiring several private ports located in Maharashtra and Andhra Pradesh.

#JSW Infrastructure

JSW Infrastructure, part of the JSW group, provides maritime-related services, including cargo handling, storage solutions and logistics services. The company develops and operates ports and port terminals under port concessions.

It handles various cargo, including dry bulk, break bulk, liquid bulk, gases, and containers.

JSW Infrastructure operates nine ports and port terminals, which typically have long concession periods ranging between 30 and 50 years, providing the company with long-term visibility of revenue streams.

Particulars	Adani Ports	JSW Infrastructure
Market Cap (in Rs billion)*	2,846.00	528.9
Cargo Handling Capacity (in million metric tonnes (MMT)	580	170

Data Source: Equitymaster, company presentation|*as on February, 27, 2024|** as of December 2023

In terms of marketcap, Adani Ports & SEZ is a larger company with a marketcap of Rs 2,846 billion (bn), compared to JSW infrastructure, which has a marketcap of Rs 528.9 bn.

APSEZ is also leading in terms of cargo handling capacity. At the end of December 2023, the company's cargo handling capacity was 580 Metric Tons Per Annum (MTPA) when compared to JSW Infrastructure, which has an installed capacity of 170 MTPA.

If we compare the two companies' performance on the bourses, Adani Ports is leading again. In the last year, the company gave a 137.5% return, whereas Nifty 50 gave a 27.5% return.

JSW Infrastructure shares were listed on the stock exchange in October 2023, and since then, the shares have gained over 49%, whereas APSEZ gave a return of 60.7% during the same period.

#Revenue

Despite earning lesser revenue than APSEZ, JSW Infrastructure's revenue has grown at a compound annual growth rate (CAGR) of 24.2%.

The primary reason behind this is healthy growth in cargo volumes and high capacity utilisation. In the last one year, the capacity utilisation increased to 59% from 39%.

APSEZ's revenue is almost 6.5 times that of JSW Infrastructure, and it has grown at a CAGR of 13.8%, driven by high growth in cargo handling volumes. In the last five years, the cargo handled by the company grew at a CAGR of 12%.

Moreover, it also witnessed healthy growth in non-ports segment (logistics) revenue driven by various acquisitions.

Going forward, both companies are expected to witness a high growth in revenues on account of higher cargo volumes driven by growing demand.

Revenue

Net Sales (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Adani Ports & SEZ	1,09,254	1,14,388	1,25,496	1,71,188	2,08,519	13.80%
JSW Infrastructure	10,803	11,431	16,036	22,731	31,947	24.20%

Data Source: Equitymaster

#Profitability

In terms of profit growth, JSW Infrastructure again outpaced APSEZ.

In the last five years, its earnings before interest, tax depreciation (EBITDA) and net profit grew at a CAGR of 25% and 22.5%, respectively.

Healthy growth in operations has helped the company grow its profits at a healthy rate. The profit margins also improved significantly due to economies of scale.

APSEZ, on the other hand, witnessed an EBITDA and net profit growth of 8.3% and 5.9%, respectively, driven by growth in the scale of operations.

Profitability

EBITDA (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Adani Ports & SEZ	65,226	54,417	79,692	91,366	97,215	8.30%
JSW Infrastructure	5,302	6,192	8,082	11,094	16,202	25.00%
PAT (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Adani Ports & SEZ	40,448	37,845	50,487	49,532	53,928	5.90%
JSW Infrastructure	2,720	1,965	2,846	3,304	7,495	22.50%
Gross Profit Margin	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	59.70%	47.60%	63.50%	53.40%	46.60%
JSW Infrastructure	49.10%	54.20%	50.40%	48.80%	50.70%
Net Profit Margin	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	37.00%	33.10%	40.20%	28.90%	25.90%
JSW Infrastructure	25.20%	17.20%	17.70%	14.50%	23.50%

Data Source: Equitymaster

#Debt Management

Both APSEZ and JSW Infrastructure have significant debt on their books.

Adani Ports has a long-term debt of Rs 465 bn as of March 2023, whereas JSW Infrastructure has a long-term debt of 40 bn.

Both companies have a debt-to-equity ratio of 1x at the end of the financial year 2023.

APSEZ incurred significant capex in the form of acquisitions in the last few years. It has several acquisitions lined up for the medium term as well.

To add to this, it is investing in a greenfield port in Kerala and co-developing a new terminal in Sri Lanka. This will only increase the company's debt levels further.

However, the company intends to reduce its debt by Rs 50 bn in the financial year 2024 and has announced a bond buyback program.

JSW infrastructure, on the other hand, has significant capex plans. It plans to expand its LPG capacity at JSW Jaigarh Port, set up an electric substation, and install a dredger.

For this, the company will incur substantial capex, which it plans to fund through the IPO proceeds it receives.

The company is also planning to reduce its debt but repay some of its obligations from the IPO proceeds.

Debt Management

Debt to equity ratio (x)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	0.8	1	1.1	1	1
JSW Infrastructure	0.7	1	1.2	1.3	1

Data Source: Equitymaster

#Financial Efficiency

To know how efficiently a company is running its business and how much return it is generating for its investors, you must look at its return ratios.

Two important return ratios are return on capital employed (RoCE) and return on equity (RoE). The former tells how much return a company generates from its capital, and the latter tells how much return it generates for its equity investors.

In the last five years, Adani Ports' RoE and RoCE of averaged 14.5% and 11.9%, respectively. For JSW Infrastructure, the return ratios stood at 11.2% and 11.7% respectively.

Both the company are generating similar returns from the capital invested. However, in the last five years, JSW Infrastructure's ratios have consistently increased, whereas APSEZ's return ratios have fallen continuously.

Financial Efficiency

ROCE	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	14.80%	12.00%	13.50%	10.60%	8.80%
JSW Infrastructure	9.50%	9.90%	10.30%	11.50%	17.40%
ROE	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	16.50%	14.80%	16.50%	12.90%	11.80%
JSW Infrastructure	9.50%	7.70%	9.80%	10.10%	18.80%

Data Source: Equitymaster

#Dividend

Adani Ports has consistently paid dividends to its shareholders.

Its five-year average dividend yield and dividend payout ratio stood at 0.7% and 15.9%, respectively.

JSW Infrastructure, on the other hand, hasn't paid any dividends to its shareholders in the last five years.

Dividend

Dividend Per Share (Rs)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Adani Ports & SEZ	0.2	3	4.7	4.9	5	92.30%
JSW Infrastructure	0	0	0	0	0	NM
Dividend Yield	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	0.10%	1.00%	1.00%	0.60%	0.70%
JSW Infrastructure	0.00%	0.00%	0.00%	0.00%	0.00%
Dividend Payout Ratio	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Adani Ports & SEZ	1.00%	17.20%	20.10%	21.30%	20.00%
JSW Infrastructure	0.00%	0.00%	0.00%	0.00%	0.00%

Data Source: Equitymaster

#Valuations

To determine the real worth of a company, it is important to look at its valuations.

Two important valuation ratios are price to earnings (P/E) and price to book value (P/B). A high ratio compared to its peers indicates the company is overvalued, and a low valuation indicates it is undervalued.

Adani Ports' P/E ratio is 39.2x, and the P/B ratio is 5.6x. JSW Infrastructure's P/E and P/B ratios are 72.3x and 5.3x, respectively.

In terms of P/E, JSW Infrastructure is highly overvalued when compared to APSEZ, and in terms of P/B, APSEZ is slightly overvalued.

When compared to the industry average, both companies are overvalued.

Valuations	Adani Ports & SEZ	5-Year Average	JSW Infrastructure
P/E (x)	39.2	23.2	72.3
P/B (x)	5.6	3.3	5.3

Data Source: Equitymaster

Which is a Better Ports Player: Adani Ports or JSW Infrastructure?

In terms of revenue growth, profit growth, and return ratios, JSW Infrastructure is leading.

However, in terms of dividends and valuations, Adani Ports fares better.

Being the largest commercial port operator in India, Adani Ports has an advantage over JSW Infrastructure in terms of cargo handling capacity and asset diversification.

The company has expanded its presence in all major ports organically and inorganically. This led to the company accounting for 24% of the volumes handled at Indian ports.

Moreover, it has several capex plans to expand its ports and non-ports segment revenues. It plans to acquire ports and logistics companies to increase its cargo handling capacity and asset base.

This could positively impact its profit margins in the coming years.

JSW infrastructure, on the other hand, invested heavily in capex to expand its cargo handling volumes. This helped the company grow its revenue and profits at a high rate.

Now, the company is concentrating on asset diversification by adding the capacities of LPG handling and other products.

Both JSW Infrastructure and Adani Ports and SEZ are taking advantage of the growing demand for external trade and investing to equip themselves to handle high volumes of cargo.

The increasing trend of containerisation, lower cost of coastal transportation, and favourable government policies will drive the cargo volumes upwards, and both companies are set to benefit from it.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...