Why Adani Ports Share Price is Rising

Adani group stocks have been on a tear for the last few trading sessions.

With the recent upsurge, the overall group's market capitalisation has crossed Rs 11 trillion (tn), the highest level seen in the past seven months.

Reports state that this feat was last achieved on 1 February 2023, a week after the Hindenburg Research report was made public.

Riding the wave of positive market sentiment, shares of Adani Ports and Special Economic Zone, India's largest private port operator, have witnessed a rally of 9% in the past five trading sessions.

Notably, it stood out as the leading gainer on the benchmark Nifty 50 index.

Here's why shares of this Adani company have been on a roll.

#1 GQG Partners & promoters hike stake

In August 2023, shares of Adani Ports & Special Economic Zone (APSEZ) rose over 3% after GQG Partners acquired an additional stake in the company.

GQG Partners, the US boutique firm, had increased its stake in Adani Ports from 4.93% to 5.03% through bulk deals on 17 August 2023, as per the regulatory filing on 19 August 2023.

GQG Partners acquired 2,256,854 shares in the additional purchase taking their total ownership to 108.7 (million) shares in APSEZ.

This investment move follows the departure of Deloitte as the auditor for Adani Ports, marking the first such instance following a critical report published by US short-seller Hindenburg Research on the Adani group in January.

Update: Apart from GQG, promoters of the company have also been buying shares from the open market in recent weeks.

Between August 14 and September 8, the promoter group raised their stake in Adani Ports from 63.06% to 65.23%, according to stock exchange filings.

Two promoter group firms - Resurgent Trade and Investment and Emerging Market Investment DMCC picked 1% and 1.2% stake, respectively in Adani Ports via open market transactions.

When marquee institutions buy shares in a company, it raises confidence among retail individuals. But when promoters are also putting money out of their pockets to acquire additional stake, it spurs an even more positive sentiment.

That's what has happened with Adani Ports.

Despite concerns lingering about the second allegations on the group companies, shares of almost all companies are on an uptrend.

Almost seven months after a US short seller came out with its big report on the Adani group and shook the markets to its core, another organisation funded by George Soros and Rockefeller Brothers Fund claimed that millions of dollars were invested in some publicly traded stocks of Adani Group via 'opaque' funds based in Mauritius.

#2 Strong Q1 results

For the June 2023 quarter, Adani Ports and Special Economic Zones' revenue from operations climbed 23.5% YoY to Rs 62.5 billion (bn) from Rs 50.6 bn a year back. The company's topline saw a positive impact from additional revenue generated by fresh acquisitions.

Earlier in the year, Adani Ports paid US$ 1.2 bn to acquire the Haifa port in Israel.

The Port of Haifa is the second largest port in the country in terms of shipping containers and the biggest in shipping tourist cruise ships.

It reported an 82.6% rise in consolidated net profit to Rs 21.1 bn for the June 2023 quarter from Rs 11.6 bn reported last year.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 80% YoY to Rs 37.7 bn.

Cargo volume grew 12% YoY to over 101 million metric tons (MMT), supported by container growth of 15%. Adani Ports' market share in India jumped around 2% to 26%.

Cargo volume grew 12% YoY to over 101 MMT, supported by container growth of 15%. Adani Ports' market share in India jumped around 2% to 26%.

Its domestic cargo volumes recorded an 8% YoY increase, which is 3x India's cargo volume growth rate in the same period. Mundra handled 1.72 Mn TEUs (twenty-foot equivalent units) in the quarter, which is 12% higher than its closest competitor.

Krishnapatnam Port recorded strong volumes by handling 5 MMT cargo volumes in all three months of the quarter.

#3 G20 Effect

The other reason why shares of Adani Ports are rising is because of the G20 effect and the multiple deals that India signed with countries over the past few days.

India, the US, Saudi Arabia and the European Union recently announced a historic agreement to soon launch a mega India-Middle East-Europe shipping and railway connectivity corridor.

This deal is expected to connect countries in the Middle East via a network of railways. The network will also connect to India through shipping lanes from ports in the region.

Now according to reports, the Haifa port is set to be at the centerstage of the India-Middle East- Europe economic corridor announced at the G20 Summit.

And guess who owns the Haifa port now!

Earlier this year, Adani Ports paid US$ 1.2 bn to acquire the Haifa port in Israel. The Port of Haifa is the second largest port in the country in terms of shipping containers and the biggest in shipping tourist cruise ships.

So you could see where the optimism is coming from...

Ambitious infrastructure expansion plan

Adani Ports and Special Economic Zone has set a capital expenditure target of Rs 45- 50 bn for fiscal 2024. It also targets to lower its net debt-to-EBITDA ratio from 3.1 times in the financial year 2023 to 2.5 times during the current fiscal, according to its Q1 investor presentation.

The company plans to expand its warehousing capacity by 37.5 times, its rail track distance by 3 times, and its grain silo capacity by 2 times.

The multi-port operator, which is a part of billionaire Gautam Adani-led Adani group, sees cargo volumes at 370-390 million metric tonnes (MMT), resulting in its financial year 2024 revenue of Rs 240-250 bn and EBITDA of Rs 145-150 bn.

Apart from this, the company is adding a new container terminal at Mundra Port with a capacity of 12 million tonnes per annum (mtpa). The terminal is expected to be commissioned in 2024.

How Adani Ports shares have performed recently

The share price of Adani Ports has surged over 9% in the past week.

In 2023 so far, Adani Ports share price is up over 6%.

Adani Ports has a 52-week high quote of Rs 987 touched on 20 September 2022 while the stock touched its 52-week low of Rs 395.1 on 3 February 2023.

The stock is currently trading at a PE (price to earning) ratio of 603.5x.

About Adani Ports

Adani Ports and Special Economic Zone (APSEZ) is the largest commercial ports operator in India accounting for nearly one-fourth of the cargo movement in the country.

Its presence across 12 domestic ports in seven maritime states of Gujarat, Maharashtra, Goa, Kerala, Andhra Pradesh, Tamil Nadu, and Odisha is the most widespread national footprint with deepened hinterland connectivity.

Through its subsidiary Adani Logistics, APSEZ operates three logistics parks located at Patli in Haryana, Kila-Raipur in Punjab, and Kishangarh in Rajasthan.

For more details about the company, you can have a look at Adani Ports factsheet and quarterly results on our website.

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