“A 5% fall in the stock of ADSEZ on war fears presents an even better opportunity to buy this strategic asset with long-duration concessions across India and as HPC contributes only 1.3% of our SOTP. Following the recent correction, ADSEZ is trading at a 43% discount on FY25CL PE to Concor,” CLSA said.
The ports operator yesterday clarified that the overall contribution of Haifa in the company’s numbers is relatively small at 3% of the total cargo volume.
“For the current financial year (Apr 23-Mar 24), we have guided for Haifa Cargo volumes range of 10-12 MMT and APSEZ’s total cargo volume guidance of 370-390 MMT. In the initial six months (Apr-Sep 23), APSEZ’s total cargo volume was ~203 MMT, of which the Haifa share is ~6 MMT. We stay confident of APSEZs business performance,” Adani Ports had said.
Haifa Port is a profit-making port focused on bulk and containers, with scope for operating leverage by reducing employee costs, per its retirement plan, and long-term real estate development upside.
“Given a lot of HPC traffic is imports of coal and bulk materials, it should have reasonable stickiness. Further HPC is located in the North versus Gaza in South, so disruptions are likely to be minimal,” CLSA said.
The port will also play a big role in the India-Middle East-Europe economic corridor (IMEC) launched during the G20 summit.Domestic brokerage firm Motilal Oswal has also initiated coverage on the stock with a target price of Rs 1,010. “With the addition of new ports, improvement in utilization levels of existing ports and a moderating capex, the cash flow generation is expected to remain strong. We expect APSEZ to generate Rs 383b of cumulative CFO over FY23–25, which would help keep its debt in check despite the recent acquisitions,” the brokerage said.
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