Adani Ports and SEZ Rating: buy- Momentum in volumes is likely to be sustained

We believe the volume rebound is less attributable to pent-up demand and is sustainable

Adani Ports & SEZ’s (APSEZ’s) volume recovery (13% in past six months) symbolises a Nike Swoosh or V shape? Regardless of the semantics, we believe the volume momentum will sustain driven by: (i) external factors like global & local trade momentum; and (ii) importantly, internal factors like market share gains, cargo diversification, improved hinterland, cargo stickiness, among others. Regular price hikes further enhance earnings prospects. Riding a much sharper-than-expected recovery (7% beat on Q3 volume estimates), we raise FY21-23e EPS by 10%. We also roll forward our valuation to Q1FY23e and accordingly raise our TP to Rs 600 (earlier Rs 520). Maintain Buy.

Pandemic impact on volumes nullified; robust growth visibility
With a pandemic-driven ~30% y-o-y dip in Q1 volumes, FY21 was estimated to be a step back for APSEZ’s growth story. However, it has surprised pleasantly with a sharp 13%/20% organic growth in H2CY20/Q3FY21 (22%/ 37% including KPCL), ending 9mFY21 flat y-o-y (ex-KPCL). This compares with an industry decline of 11% in similar period, denoting further market share gains for APSEZ