Basic analysis of Adani Ports – competitive advantage, future plans & more

Basic analysis of Adani Ports – competitive advantage, future plans & more

Adani Ports Fundamental Analysis - Cover image

Key Analysis of Adani Ports: The rise of Gautam Adani to the fourth richest person in the world surprises many. The prices of most Adani Group companies have been triggered in recent years. One of those feathers on his hood has been Ports Adani and Special Economic Zone.

In the last two years, it has given a multibagger return of 130%, since the stock was collected from β348 to ⇒800 per action.

In this article, let us take a look at the fundamental analysis of Adani ports. We will take a quick analysis of the maritime industry and the history of the company along with your business. Later, a section has been dedicated to a competitive advantage study and a conclusion summarizes the article at the end. So let’s dive!

Key Analysis of Adani Ports – Industry Overview

India ' s commodity exports have grown in a CAGR of 6.81% in five years of FY18 ($304 million) to FY22 ($422 billion). During the same time, the nation’s imports grew annually at a rate of 5.64% of $466 billion in FY18 to $613 billion in FY22.

This therefore leads to India ' s growing participation in global trade. India ' s global trade share increased from 2.1 per cent in 2017 to 2.6 per cent in FY21 according to WTO data.

Both statistics point to the growth of the Indian maritime industry. The industry is slowly on its way after a lesser beating during the pandemic-induced blockade. This was followed by an increase in container prices and disruption in the world container market.

In spite of this, the cargo traffic in the main and not greater ports of India grew by 7.2% and 4.1% respectively in FY22.

We can say that India’s world trade has grown in the last five years at a healthy pace. Since ports are a window to world trade, their promotion results directly in the growth of the maritime sector. Growth is expected to remain strong in the coming years.

The logistics sector is the other sector in which APSEZ operates. In India, only 10% of the logistics industry is organized. Since it requires heavy capital investments, a clear logistics policy will help accelerate growth in the industry.

Let us now understand the company around which the article rotates.

Basic analysis of Adani Ports – General information of the company

Adani Ports and SEZ was started more than two decades ago in 1998. By 2013-2014 it became the largest private sector port company in India. It has a vision of positioning itself as the largest private port entity in the world.

From today, it has a handling capacity of 498 MMTPA load. The company operates 3 logistics parks and 12 port terminals. In terms of land space, it has 15,000 hectares of industrial land and 4 square feet of storage. Adani Ports employs 2,736 people with an impressive average of 8 years.

Its facilities are strategically located pan-India giving the company an integrated and competitive advantage.

Adani Ports Fundamental Analysis - Ports image

Pan-India strategic presence of Adani Ports and Special Economic Zones Ltd.

Key Analysis of Adani Ports – Business segments

We just went through a quick overview of the company. Now we move forward to understand your business segments in detail.

With its 12 national ports distributed in seven maritime states, APSEZ manages almost 1/4 of the cargo movement in the country. Its ports are able to handle even the larger ships. Along with this, the facilities are equipped to manage different types of load: dry, liquid, raw and container.

Along with the port business, it also has three logistics parks in Haryana, Punjab and Rajasthan. It offers a variety of services as part of its logistical offers such as the logistics of cars, indoor waterways, logistics parks, warehouses and more.

The well-integrated structure of APSEZ gives you a competitive advantage over other companies. It also results in creating more value for your customers. The Mundra SEZ in Gujarat is a good example. The 8,000-hectare industrial centre offers multiple port infrastructure services.

Finally, but not least, Adani Ports also operates a large fleet of 23 dredgings that provide dredging and recovery solutions. In simple terms, dredging means lowering the level of a waterbed (a port, river or other water area) and regeneration means increasing it. These can be for cleaning purposes, new construction, land formation, etc.

Adani ports – Growth of income and net profits

Adani Ports Fundamental Analysis - -Revenue and NPM growth

APSEZ exceeded the market in FY22 by registering a growth of 26% in load handling. It handled 312 MMT load in FY22 compared to 247MMT in FY21. This contrasts with a 5% growth in the entire Indian load volume. This gives an image of the rapid growth of Puertos Adani and SEZ.

As for its storage segment, it added 0.43 million square meters. ft. translating into an impressive 108% growth.

The revenues of the harbour company have grown steadily over the years. It has grown inorganically over the years acquiring several other ports. For example, last year the company spent Rs. 14,659 crores to acquire three ports, namely, Dighi Port, Krishnapatnam Port, and Gangavaram Port.

Taking a five-year horizon, their income has grown at a CAGR of 7.07%. Their earnings have also increased steadily, although at a slower rate of 5.17%. From a year to year, the topline grew 27% to Rs. 15,934 crores in FY22, while the net profit saw a decrease of 5,33% to Rs. 4,728 crores.

The following table shows the annual income and net benefits of the ports of Adani and the SEZ for the last five years.

Year Income (Rs. Cr.) Net Profit (Rs. Cr.)
2022 15.934 4.728
2021 12.550 4.994
2020 11,873 3.763
2019 10.925 3,990
2018 11,323 3.674
5-Yr CAGR 7.07% 5.17%

Ports of Adani – Margin of the Operative Profit and Margen of Profit Net

The port industry has higher operating profit margins. Most port operators have more than 55% of the operating margin. The consequent net profit margin depends on the use of debt-paid capacity and interest.

Historically, Adani Ports and SEZ have demonstrated a healthy functioning and net profit margins. The following table lists the profit margins of APSEZ over the past five years.

Year Operating Profit Margin Margen Net-Profit
2022 56% 30%
2021 64 per cent 40%
2020 50% 32%
2019 60% 37%
2018 63% 32%

Ports of Adani – Debt and Returns

Apart from their returns, Adani group companies are famous for one more thing: their debt. Ports Adani and SEZ are also not an exception.

In the table below, we can see that total loans have almost doubled in the last five years. As for the relationship between debt and equity, it has increased but not at a very alarming rate.

And speaking of the profitability of equity, Adani Ports has a higher yield of equity than the return of the capital employed due to a higher proportion of debt in the capital. It has remained volatile due to company acquisitions and subsequent time taken to increase its efficiency.

Thus we can conclude that APSEZ has a high debt, but the administration has faith in the income to meet the debt and interest with the interest rate of 4.34 for the year ending 2022 March.

Year Total loans (Rs. Cr.) Debt/Equity Return to equity (%)
2022 47.619 1.19 12.41
2021 35.583 1.13 16.40
2020 29.979 1.09 14.78
2019 27.446 1.07 16.26
2018 22.112 1.01 17.43

Ports of Adani – Competitive advantages

There’s nothing new about the maritime sector. He’s been there for a long time. The profitability of Adani Ports and SEZ engenders the question of how APSEZ is different from other port operators in India.

Technological advances and increased efficiency helped Indian ports to increase their average production by boat. In six years from FY2016 to FY21, port efficiency increased by 32%. And this increase in asset utilization was led mainly by private port players like APSEZ.

Along with this, Adani Ports has done a very good job of integrating storage and industrial zones with the port business. Thus, at one end we have better efficiency and at another end of the spectrum, the integrated nature of the APSEZ. Thus, these two points were joined to give a competitive edge to the company.

Ports of Adani – Future plans

APSEZ invested ο 11,400 crores in acquisitions in FY22. Along with this, the company spent 3,750 crores on organic capital expenses.

Recently, the company purchased an indoor container tank from Navkar Corporation for ⇒ 835 crores. Adani’s acquisitions are in line with the vision of creating integrated ports and a logistics company.

Investors can expect more revenue in the coming years as the newly acquired facilities advance.

In addition, the Indian government has identified 31 port projects for monetization worth 14,483 crores for FY22-25. Of these, 13 are expected to be bid in FY22 and more than 10 in FY23. This implies another acquisition output for the Adani and SEZ ports, as it is the largest private port player in India.

In addition to this, the company recently partnered with Flipkart to establish a realization center. This is only one of the many other projects that the logistics arm of APSEZ has undertaken.

Therefore, we can witness more acquisitions and alliances of Adani Ports and SEZ in both segments: ports and logistics.

Key Metrics

We’re almost at the end of the article. We run quickly through some more figures.

CMP Rs. 800 Market Cap (Cr.) Rs. 170.000
Stock P/E 34,5 Nominal value Rs. 2.0
ROCE 9.9% Book value Rs. 180
ROE 12.41% Price to book value 4.6
Debt/Equity 1.24 Promoter Holding 66%
Net Profit Margin 32.2 per cent Operating Profit Margin 56%
Net debt/EBIDTA 3.4 Dividend Payout Ratio 22%

We can note that:

  1. The company maintains a healthy dividend payment relationship that means that the administration has confidence in the service of its heavy debt in the future through profits.
  2. The net debt to EBIDTA is low from a general perspective, but still well within the guidance provided by the company.
  3. The relationship between debt and equity is high as the company has used loans to finance its acquisitions.
  4. The promoters are very bullish in the business since the promoter shared 66%. Over the past few years, the Adani group has returned to buy slowly and has increased its participation in the port business.
  5. Stock P/E is high but it also incorporates the strength of the company such as healthy return ratios, profit margins and steady growth in revenues ” profit.


Despite high debt levels, Adani port revenues have increased at a sustainable rate. The stock currently quotes in 4.6 times its book value, superior to its five-year average of 3.5x. Therefore, it will be interesting to see if there will be any correction in the future. Or 4.6x book value will be the new multiple price for stock.

Time is said to have all the answers on the market. Let’s wait and look. Until then he keeps saving and keeps investing. Let us know here what you think about Adani Ports’ fundamental analysis. Winters?

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