Financial analysis of seven listed Adani companies (SLAC) ex-AWL
SLAC (ex-Ambuja Cements or ACL) trades at 29x FY24 EV/EBITDA, at a premium to Mar 2019/20 levels. Over FY20-24, ex-ACL (acquired in FY23 by the unlisted Adani group), net external debt (NED) rose 80% while EBITDA rose 169%. Ex-ACL, NED/ EBITDA was 3.4x, much lower (better) than in FY20/23 (5x each). While SLAC's NED/EBITDA was 2.9x, we believe that if ACL had been acquired by SLAC, it would be at 3.6x. NED/EBITDA (FY24) of APSEZ (2.4x), APL (1.6x) and ATGL (0.9x) are benign while that for ADE (4.1x), AESL (6.1x) and AGEL (6.8x) are higher. Over Mar 2021-24, capex for SLAC ex-ACL (Rs2.7tr) was funded via cash profit (48%), NED (36%) and others (17%; mainly promoter funding and equity raising). We believe the funding pattern is reasonable. Pledged shares, as a percentage of promoter holding (ex-ACL) in Mar 2024 was at 4.3%, much lower than in Mar 2020 (43%). Including the locked-in shares of ACL, 6.7% of the promoter holding is pledged/ locked-in. Net related party dues of SLAC to the unlisted Adani group in Mar 2024 were Rs196bn (10% of NED; flat yoy) - 47% of market value of pledged shares (ex-ACL).
We expect APSEZ's cargo to post an 8.5% CAGR over FY24-26F
Our growth estimate may seem at odds with that over FY20-24 (17.1% CAGR). However, excluding acquisitions over FY21-24, volume CAGR was at 7.7%. Coal: We estimate 12% CAGR (39mt) over FY24-26F from 158mt in FY24, above our 6.2% p.a. estimated growth for the sector, partly driven by a further ramp-up of Adani Power and Tata Power plants. Container: We estimate a 10% CAGR vs. a 7% CAGR for the sector.
Despite capex, APSEZ's balance sheet is healthy
Over FY22-24, capex of Rs465bn (incl. Rs276bn of acquisitions) and Rs42bn of dividends were funded by Rs281bn cash profit, a Rs100bn rise in net debt, Rs41bn reduction in net working capital or NWC and Rs83bn of share issuance for acquisitions. While the steady improvement (fall) in NWC/ sales from 51% (FY21) to 9% (FY24) is encouraging, we feel there is room for improvement as Gujarat Pipavav's NWC/sales was (-) 34% in FY24. 60% of the capex over FY22-24 was funded via internal accruals. Despite a 55% rise in assets, NED/EBITDA is benign. Related party dues were just Rs13bn in FY24.
Maintain target price; downgrade to REDUCE (from HOLD earlier)
We cut our EBITDA estimates for FY25/26F by 3% each but maintain our target price of Rs1,329. We factor in an EBITDA CAGR of 14% over FY24-26F. APSEZ trades at 18.2x FY25F EV/EBITDA vs. six-year average one-year forward EV/EBITDA of 14.1x. Thus, we downgrade the stock's rating to REDUCE (from HOLD earlier). Our target price implies 15x FY26F EV/EBITDA. Upside risk: Higher growth vs. our estimate.
Shares of Adani Ports and Special Economic Zone Limited was last trading in BSE at Rs. 1448.85 as compared to the previous close of Rs. 1444.95. The total number of shares traded during the day was 153753 in over 10341 trades.
The stock hit an intraday high of Rs. 1452.95 and intraday low of 1421.10. The net turnover during the day was Rs. 221181399.00. |
