JM Financial Institutional Securities has reaffirmed its 'Add' rating for Adani Ports and Special Economic Zone Ltd (APSEZ), projecting a target price of ₹1,935. The brokerage's optimistic outlook is primarily based on its belief that the Adani Group firm is well-positioned to surpass its FY27 EBITDA guidance, which stands between ₹2,500-2,600 crore.
On Thursday, Adani Ports shares experienced a 2 percent increase, aligning with a significant 19.3 percent year-on-year (YoY) surge in the company's August cargo volumes. The stock commenced trading at ₹1,690.05, up from its previous close of ₹1,672.90 on the BSE, and reached an intraday high of ₹1,710, marking a 2.22 percent rise. This upward movement occurred amidst a largely stable broader market, with the Nifty 50 showing only a marginal 0.04 percent gain in afternoon trading.
Strong Cargo Volumes Drive Optimism
JM Financial highlighted that Adani Ports' robust August cargo performance was fueled by a 25 percent YoY increase in dry cargo volumes and a 15 percent rise in container volumes. A notable contributor to this dry cargo growth was the North Queensland Export Terminal (NQXT) in Australia, which began contributing to Adani Ports' overall volumes in the fourth quarter of FY26.
Excluding NQXT, the brokerage estimated the underlying cargo volumes for August at approximately 46 million metric tonnes (mmt), indicating a growth of about 10.5 percent YoY. This figure represents an improvement compared to the estimated 7 percent growth observed in July, signaling a positive trend in underlying volume expansion.
FY27 Outlook and Rail Logistics Challenge
For FY27, up to August, Adani Ports has managed 234.5 mmt of cargo, equating to a monthly run rate of around 47 mmt. Based on this consistent pace, JM Financial considers its full-year estimate of 565 mmt for FY27 cargo volumes to be achievable. The underlying volume growth, excluding NQXT, is projected to be around 8.5 percent for the entire fiscal year.
However, the brokerage did identify a point of concern within the company's rail logistics segment. Rail container volumes for August stood at 54,100 TEUs, marking a 5.6 percent decrease YoY. Furthermore, volumes for FY27 through August were down approximately 33 percent, which JM Financial suggested could indicate a potential loss of market share in rail container cargo.
Despite this challenge, JM Financial anticipates that Adani Ports is capable of exceeding its FY27 EBITDA guidance. The brokerage's estimate for core EBITDA is ₹2,620 crore, representing a 15 percent YoY increase, coupled with an EBITDA margin of 59.8 percent for FY27. The target price of ₹1,935 implies an approximate 16 times FY28 estimated EV/EBITDA, suggesting a potential upside of 17.4 percent from the report's market price of ₹1,648.