Strong cargo volumes boost Adani Ports stock

APSEZ reported FY 25 results on May 2, 2025, with a 16.4% y/y revenue increase to INR310.8bn, driven by higher cargo volumes. EBITDA rose 19.9% to INR190.2bn, with margins up 182bp to 61.2%. Net profit grew 36% to INR110.6bn, with margins expanding 522bp to 35.6%. Cargo volume reached 450 MMT, up 7% y/y. With Jefferies raising its target price for the share to INR1,475, it has risen by over 15% since the announcement.

Founded in 1998 and headquartered in Gujarat, India, Adani Ports and Special Economic Zone Limited (APSEZ) is the largest commercial ports operator in India, representing nearly a quarter of the country's cargo movements. Present across 13 domestic ports in seven maritime states, APSEZ boasts the most widespread national footprint, offering deepened hinterland connectivity. The port facilities are equipped with state-of-the-art cargo-handling infrastructure, capable of accommodating the largest vessels that call at Indian shores. These facilities are designed to handle a diverse range of cargos, including dry cargo, liquid cargo, crude, and containers.

APSEZ has over 3,100 employees and is listed on the National Stock Exchange of India. The company specializes in various logistics sectors such as retail, industrial, container, bulk, liquids, auto and grain logistics. By integrating advanced technology, APSEZ delivers cutting-edge infrastructure and seamless supply chain solutions, ensuring efficient and reliable operations.

Marine business expansion

APSEZ launched a strategic initiative to expand its marine business, acquiring the offshore support services operator Astro Offshore. This acquisition will enhance APSEZ’s global marine portfolio, attract Tier-1 customers, and strengthen its geographical footprint. By FY 25, APSEZ’s marine fleet included 115 vessels from Ocean Sparkle, Astro, and TAHID, with Adani Harbor operating an additional 46 vessels across APSEZ ports. With plans to triple its marine business in two years, APSEZ is targeting opportunities in the Middle East, Africa, and South Asia (MEASA) waters, solidifying its position in the global maritime industry.

In a strategic move to bolster its operations, APSEZ has committed a total investment of INR120bn across various sectors. This includes INR60bn for domestic ports, INR20bn for logistics, and INR13.8bn for technological capex and decarbonization efforts. APSEZ aims to achieve a threefold increase in marine revenue by FY 27 from FY 25, projecting revenues between INR360-380bn and EBITDA of INR210-220bn. The company also plans capex of INR110-120bn, with port cargo volumes expected to reach 505-515 MMT. Over the past decade, both all-India and APSEZ domestic cargo volumes have grown at a CAGR of 4%, reaching 1,593 MMT and 431 MMT respectively by FY 25. APSEZ handled 27% of the country’s total cargo and 45.5% of container cargo, representing a slight increase from the previous year.

Growth driven by operational efficiencies

APSEZ has reported impressive revenue growth over the last three years (FY 22-25), with a CAGR of 25%, reaching INR310.8bn in FY 25. This growth was driven by an increase in cargo volumes. EBITDA grew at a CAGR of 25.1% to INR190.2bn, with a margin of 61.2% in FY 25, attributed to improved operating efficiencies and capacity utilization. Net profit grew at a CAGR of 32.7%, reaching INR110.6bn, with margins expanding by 584bp to 35.6% in FY 25.

Over the last three years, cash from operations rose to INR172bn in FY 25 from INR98bn in FY 22. However, cash and cash equivalents decreased from INR86bn in FY 22 to INR34.1bn in FY 25.

In comparison, its local competitor, JSW Infrastructure Ltd., experienced a revenue CAGR of 25.2% over the last three years, reaching INR44.8bn in FY 25. EBITDA grew at a CAGR of 28% to INR23.4bn. Net income grew at a CAGR of 67.7% to INR15bn.

Positive analyst sentiments

Over the past year, APSEZ's stock has delivered negative returns of approximately 3.4%, while JSW Infrastructure shares have increased by about 3.4% over the same period.

APSEZ is currently trading at a P/E of 24.2x, based on FY 26 estimated EPS of INR56.7, which is lower than JSW Infrastructure’s P/E of 38.8x and APSEZ’s three-year historical average of 28.1x. Likewise, the stock is currently trading at an EV/EBITDA multiple of 15.7x, based on FY 26 estimated EBITDA of INR212.3bn, which is higher than its three-year historical average of 17.1x and JSW Infrastructure’s 24.4x.

APSEZ is liked by 16 analysts, with 12 having ‘Buy’ ratings and four having ‘Outperform’ ratings, resulting in an average target price of INR1,566. This implies 14.2% upside potential from its current price.

Analysts’ positive view is supported by an anticipated EBITDA CAGR of 14.9% over FY 25-27, reaching INR243.3bn, with margins of 58.6% in FY 27. Net profit is expected to grow at a CAGR of 13.1%, reaching INR141.8bn, with margins of 34.2% in FY 27. EPS is expected to increase to INR65.8 in FY 27 from INR51.4 in FY 25. For JSW, analysts estimate EBITDA CAGR of 17.2% and net profit CAGR of 7.5%.

Overall, APSEZ has shown strong growth, driven by increased cargo volumes and operational efficiencies. Strategic initiatives, including the acquisition of Astro Offshore, have expanded its global marine portfolio. APSEZ's substantial investments and promising opportunities in MEASA waters position it well for future growth in the global maritime industry.

However, APSEZ faces several risks, including industry, political, and regulatory challenges, as well as competition. Operational risks encompass technology, climate, project commissioning, and controls. Financial risks involve debt repayment, returns, and liquidity. Strategic risks include geographic focus, land availability, and human rights concerns.