Kotak Institutional raises target price for Adani Ports and SEZ to ₹1,650, says outperformance can continue for long

livemint.com:

Adani Ports and Special Economic Zone (ADSEZ) to ₹1,650 per share, up from the previous target of ₹1,550. The upgrade is based on the company’s continued outperformance in FYTD24.

The revised target price indicates an upside potential of nearly 18% from the stock's latest trading price of ₹1,400. Also, this target price indicates a new all-time high level for the stock.

The brokerage highlighted that despite a weak start to the year for the market, ADSEZ has continued to outperform. This outperformance is expected to be sustainable, with potential boosts to margins.Also Read: Ambuja Cements shares up 3% as Penna Cement acquisition seem value accretiveThe brokerage said that recent interactions with the management of Mundra Ports and assessments of master plans for other key ADSEZ ports showed significant growth potential, with the capacity to expand by 5–6 times over time.

This gives ADSEZ a competitive advantage, as its cost of capacity expansion would be lower than that of its peers.In contrast, most competitors face challenges in scaling up their existing capacity beyond two times due to fixed capacities at their terminals and select non-major ports. This necessitates asset additions for growth, which would increase their capital costs per ton, either through winning government port terminals via bidding or constructing new greenfield terminals.Also Read: PSUs unlikely to re-rate, FMCG, private banks in focus after election results, says PL; lists top stock picksOver the past decade, ADSEZ has acquired several non-major ports from private players, enabling large capacity additions at reasonable valuations.