Adani Ports Share Rises 3% As Brokerages Gave Positive Outlook

Adani Ports & Special Economic Zone Ltd experienced a notable 3% increase in its share price during Tuesday’s trading session, recovering from a nearly 5% decline on the previous day due to concerns surrounding the conflict in Israel, where the company operates a key port. The opening price for Adani Ports shares on the BSE started at an intraday low of ₹799.95 per share. The stock reached an intraday high of ₹817.

Analysts have assessed that even in the worst-case scenario, the impact of the events in Israel would have minimal consequences for Adani Ports & Special Economic Zone. This assessment has contributed to the upward trend in Adani Ports’ stock price.

Addressing the situation, Adani Ports stated in an exchange filing on Monday that it is closely monitoring the crisis in Israel and has prepared a business continuity plan.

“We are closely monitoring the action on the ground, which is concentrated in South Israel, whereas Haifa port is situated in the North. We have taken measures to ensure the safety of our employees, and all of them are safe. We remain fully alert and prepared with a business continuity plan that will enable us to respond effectively to any eventuality.

The overall contribution of Haifa in APSEZ’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 in the range of 10-12 MMT, with APSEZ’s total cargo volume guidance between 370-390 MMT. In the initial six months (Apr-Sep 23), APSEZ’s total cargo volume was about 203 MMT, of which the Haifa share is about 6 MMT. We remain confident in APSEZ’s business performance,” the company stated in its filing.

On Tuesday, other stocks from the Adani Group also traded positively. Shares of Adani Enterprises, Adani Power, Adani Energy Solutions, Adani Green Energy, Adani Total Gas, Adani Wilmar, ACC, Ambuja Cements, and NDTV saw gains ranging from 0.5% to 3%.

Brokerage Firm Perspectives:

1. CLSA – Opportunity Amid Conflict

CLSA, the international brokerage, views the 5% decline in Adani Ports & SEZ’s share price due to concerns related to the Israel conflict as an excellent opportunity to acquire this valuable asset with long-term concessions across India. Haifa Port, which is affected by the conflict, contributes only 1.3% to Adani Ports.

CLSA maintains a ‘buy’ rating on the stock with a target price of ₹878, suggesting a potential upside of 11% from the market price of ₹789.90.

2. InCred Equities – Minimal Impact in Worst-Case Scenario

InCred Equities believes that even in the worst-case scenario, the impact of events in Israel on Adani Ports would be minimal. Israel has five ports, all under the “Israel Port Authority,” with Haifa Port representing just 3% of Adani Ports’ total cargo volume. In case of temporary disruption or damage to Haifa Port, the brokerage estimates a maximum theoretical impact/write-off of limited significance, equivalent to approximately Rs 30 per share (3-4% of Adani Ports’ current market price).

The brokerage holds a ‘hold’ rating on the stock with a target price of ₹868.

3. Motilal Oswal Financial Services – Bullish Outlook

Motilal Oswal Financial Services has a ‘buy’ rating on Adani Ports with a price target of ₹1,010, implying a substantial upside potential of 28% from the current market price of ₹790. The firm cites Adani Ports’ market leadership in the ports segment, focus on value-added areas such as logistics, and strategic acquisitions as key strengths.

Adani Ports’ acquisition of a 70% stake in Israel’s Haifa Port in collaboration with Israel’s Gadot Group for $1.2 billion in FY23 is seen as a significant move, given Haifa Port’s status as one of Israel’s major commercial ports, handling nearly half of the country’s container cargo.

These brokerage assessments underscore a positive outlook for Adani Ports despite the recent geopolitical concerns surrounding its operations in Israel.