Investec Initiates Coverage on Adani Ports With ‘Buy’ Rating, Sees 23.5% Upside

By Admin

14 Oct, 2025

UK-based brokerage firm Investec has initiated coverage on Adani Ports and Special Economic Zone (APSEZ) with a ‘Buy’ rating and a target price of ₹1,715, indicating a potential upside of 23.5% from the previous closing level. Following this announcement, Adani Ports’ shares were trading nearly 2% higher at ₹1,434.10 on the BSE on Tuesday morning.

In its initiation note, Investec highlighted that APSEZ’s current valuation of 12x FY28E EV/EBITDA is attractive, considering the company’s capacity to deliver 13% EBITDA CAGR over FY25–30 through its existing ports. The brokerage derived the target price by valuing the stock at 16 times EV/EBITDA for September 2027. Furthermore, its discounted cash flow analysis of APSEZ’s existing ports and businesses alone supports the current market price, while a strong balance sheet provides significant flexibility for future growth.

Investec projects that Adani Ports will generate operating cash flow of over ₹1 trillion between FY25 and FY30, sufficient to meet capital expenditure plans of ₹700 billion and continue deleveraging. Notably, the company’s net gearing has decreased from 1.5x a decade ago to 0.6x as of March 2025, and is expected to become negligible by FY30.

The brokerage expects APSEZ’s next phase of expansion to focus on scaling existing ports, following several years of acquisition-led domestic volume growth. Revenue is forecasted to grow at a 15% CAGR over FY25–30, with key growth anchors including Vizhinjam for transshipment in Phase II, Dhamra for coastal coal, and Mundra for containers and crude. Additionally, international port volumes are projected to rise more than fivefold following the NQXT acquisition.

Efficiency improvements and better utilization have boosted return on invested capital (ROIC) at domestic ports above 20% pre-tax, while returns from international ports are expected to improve gradually as these assets mature. Although logistics ROIC may remain below 10% through FY30 due to early-stage investments, these initiatives strengthen APSEZ’s competitive edge by capturing a larger share of customers’ logistics spend, unlocking network effects, and leveraging Adani Group volumes through technology deployment.

Since FY17, Adani Ports has funded all capital expenditure and acquisitions via internal accruals, reflecting strong cash generation capabilities. From operating a single port in FY10, the company now runs 17 ports and terminals across India and overseas, integrating its port network with a rapidly scaling logistics business to provide end-to-end solutions and build a robust marine services portfolio.

With a solid balance sheet, efficient operations, and ambitious expansion plans, Investec’s ‘Buy’ rating underscores APSEZ’s potential as a high-growth and strategically significant player in India’s maritime sector.