13-Jul-2022

ADANI PORTS AND SEZ LIMITED

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Adani
DHD Ports and Special Economic Zone Limited (APSEZ) is the largest port developer and operator in India with 6 strategically located
ports and terminals on the west coast (Mundra, Dahej, Tuna and Hazira in Gujarat, Mormugao in Goa and Dighi in Maharashtra) and 6
ports and terminals on the East coast of India (Dhamra in Odisha, Gangavaram, Visakhapatnam and Krishnapatnam in Andhra Pradesh,
and Kattupalli and Ennore in Tamilnadu) representing 24% of the country's total port capacity, thus providing capabilities to handle
vast amounts of cargo from both coastal areas and the hinterland. The company is also developing two transshipment ports at
Vizhinjam, Kerala and Colombo, Sri Lanka. The port facilities are equipped with the latest cargo-handling infrastructure and offer
handling services for all kinds of cargos from dry cargo, liquid cargo, crude and containers.

Apart from its port operations, APSEZ is the approved developer of a multi-product SEZ at Mundra, Dhamra and Kattupalli and its
surrounding areas. Through its subsidiary, Adani Logistics Ltd., APSEZ operates 5 logistics parks and 60 trains. The company’s
integrated services across three verticals, i.e. Ports, Logistics and SEZ, has enabled it to forge alliances with leading Indian businesses
making APSEZ an undisputed leader in the Indian port sector. The company has 79 subsidiaries, 9 joint ventures and 2 associates
company.

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DHD APSEZ PORTS TOTAL CAPACITY 538 MMT

APSEZ’s domestic ports are in seven maritime states
(Gujarat, Goa, Kerala, Andhra Pradesh, Maharashtra,
Tamil Nadu and Odisha).

Ports in Vizhinjam (Kerala, India) and Colombo (Sri

Lanka) are under construction.

Nearly 62% of the company’s capacity is on the west

coast of India and 38% on the east coast.

Mundra Port became the first commercial port in India

to handle cargo of 150 million metric tons.

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 REVENUE AND EBITDA BREAK-UP (FY22)

REVENUE BREAK-UP EBITDA BREAK-UP

Ports: Handling multi and complex cargo. (Operating and Management business comes under port business).
Logistics: 20-year license to operate rails. Enhancing connectivity between ports and origin/destination of cargo.
Special economic zone (SEZ): Total land bank of 12k+ Hectares. Integration with port, developing industry cluster. Regular revenue stream
through annual rentals and upfront premium.
 GROWTH
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DHD SALES GROWTH

In FY22, the net sales grew by 27% YoY to ₹15,934 cr
driven by growth in all the segment. Port business
grew by 21% YoY on account of cargo volume growth
and addition of Sarguja Rail Ltd. The company
handled 312 MMT (million metric tons) of cargo
(includes Gangavaram port, which handled cargo
volume of 30.03 MMT) compared to 247 MMT in
FY21, i.e., a growth of 26% YoY.
Logistics business grew by 26% YoY, on account of
improved container and terminal traffic along with
increase in rolling stock both for container and bulk
cargo movement. Adani Logistics Ltd. registered a
29% YoY growth in rail volume to 4,03,737 TEUs
(Twenty-foot Equivalent Unit) in FY22. The growth
was supported by recommencement of Kilaraipur
logistics park operation and commissioning of
Nagpur logistics park in December 2021.

5 Year CAGR: 13.6%

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 GROWTH
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DHD EBITDA GROWTH

In FY22, the EBITDA reported a lower growth of 2%
YoY to ₹8,879 cr because of foreign exchange loss of
₹872 cr as against foreign exchange gain of ₹715 cr.
Foreign exchange loss was due to mark-to-market
adjustment on dollar denominated debt. EBITDA
excluding foreign exchange grew by 22% YoY because
of an increase in sales.
Segment wise, the port business EBITDA grew by
21% YoY because of an increase in cargo volume &
operational efficiencies and the logistics business
EBITDA grew by 42% YoY.

5 Year CAGR: 10.9%

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DHD PAT GROWTH

In FY22, the PAT declined by 9% YoY to ₹4,602 cr
because of increased in depreciation, finance cost
and exceptional loss of ₹405 cr. The PAT excluding
forex grew by 26% YoY.
Exceptional loss was related to Directorate General
of Foreign Trade (DGFT) notification, restricting Adani
ports Service Export from India Scheme (SEIS)
benefit of earlier year (FY20) to a cap of ₹5 cr.
Acquisitions of Dighi port and Gangavaram port
(second tranche of acquiring 58.1% is underway and
is expected be complete in next few months) will
further enhance the company’s positioning in the
Maharashtra and Andhra Pradesh market and
improve the port business profit.

5 Year CAGR: 3.4%

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 GROWTH EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY22, the EBITDA margin contracted by ~1,500 bps
YoY to 69.3% because of increase in operating
expenses and foreign exchange (forex) loss.
EBITDA margin excluding forex contracted by 460 bps
to 74.7%.
Segment wise, the port EBITDA margin remained
stagnant at 70%. The logistics business EBITDA
margin expanded by 290 bps YoY to 26.5% on
account of operational efficiency and elimination of
loss-making routes.

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DHD PAT MARGIN

In FY22, the PAT margin contracted by 1,146 bps to
28.9% because of decline in operating margin,
impact of forex and exceptional loss of ₹405 cr.
The PAT margin excluding forex contracted by 29 bps
to 34.4%.
Going forward, improvement in cargo volumes,
increase in operating efficiency and capacity
utilization in new ports will help in increasing the
earning and improving the profit margin.

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DHD ROCE
In FY22, the ROCE declined to 10.6% due to decline
in EBIT and increase in capital employed. Capital
employed increased because of increase in other
equity and long term borrowings.
Port wise ROCE in FY22 are as follow:
Mundra port 16%, Hazira port 19%, Dahej port 23%,
Dhamra port 12%, Kattupalli port 2% and
Krishnapatnam port 9%.
The company is expecting the overall ROCE to
improve because of the increasing contribution of
maturing ports like Kattupalli and Dhamra which it
acquired a few years back and the recent acquisition
of Krishnapatnam, Dighi and Gangavaram Port.
Going forward, these ports will generate higher ROCE
because of higher capacity utilization and expected
improvement in operational efficiency.

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DHD ROE
In FY22, the return on equity declined to 13.4%
because of a decline in profit due to forex loss and an
increase in net worth.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

Cash flow from operations (CFO) of Adani Ports has
been continuously increasing over the years. In FY22,
it rose by 30% YoY to ₹9,800 cr.
Acquisition of property, plant and equipment of
₹3,749 cr, equity investment in joint venture
entities/associates of ₹2,624 cr, and proceeds from
fixed deposits (net) including margin money deposits
of ₹3,057 cr led to a cash outflow of ₹7,212 cr from
investing activities.
Proceeds from non-current borrowings led to a cash
inflow of ₹2,042 cr from financing activities.

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 EFFICIENCY
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WORKING
DHD CAPITAL CYCLE
Decrease in receivable days from 89 days to 61 days
has resulted in improving the working capital cycle
from 108 days to 77 days in FY22.

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 EFFICIENCY
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DHD FREE CASH FLOW

In FY22, the free cash flow continues to remain
positive.
Free cash flow per share was lower as compared to
FY21 because of higher capital expenditure.
In FY22, the company did a capital expenditure of
₹3,749 cr (v/s ₹1,954 cr in FY21).
Capital expenditure for FY23 would be in the range of
₹8,500-₹9,000 cr. This capital expenditure is a part of
the company’s planned capex of ~₹23,000 cr which
are in port, logistics, marine and warehousing
business till FY25.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY22, the asset turnover ratio remained stagnant.
Increase in property, plant & equipment, other
intangible assets, cash & cash equivalents and bank
balance led to rise in total assets.

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 EFFICIENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

In FY22, the debt to equity ratio increased to 1.20x.
The company’s short term borrowings increased
from ₹1,465 cr to ₹5,761 cr and long term
borrowings increased from ₹32,935 cr to ₹39,691 cr.
The average maturity of debt improved to ~7 years
on account of issuance of a dual tranche $750 mn
bond with an average maturity of 16 years.
41% of long-term debt is maturing post 5 years.

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 SOLVENCY
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INTEREST
DHD COVERAGE RATIO
In FY22, the interest coverage ratio stood at 3x.
Interest cost in FY22 was higher at ₹2,556 cr due to
additional debt.
The company has a moderate interest coverage ratio.
Average cost of borrowing has decreased by 70 bps
to 6.36% due to new issuances and refinancing with
lower coupons.

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 SOLVENCY
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DHD CURRENT RATIO

In FY22, Adani ports current ratio stood at 1.60x.
The current assets of the company increased
because of the increase in cash & cash equivalents
and bank balance. The current liabilities of the
company increased because of increase in short term
borrowing.
Most of the current assets are in the form of cash &
bank balance and trade receivables while most of the
current liabilities comprise of short term borrowings,
other financial liabilities and other current liabilities.
The company cash & cash equivalents and bank
balance increased from ₹4,700 cr in FY21 to ₹10,491
cr in FY22.

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 SOLVENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Adani Ports is currently trading at a TTM PE multiple
of 32.48x.
The company is growing its market share in all India
cargo volume and container segment continuously
by improving its operation in existing ports and by
acquiring new ports.
Likely increase in cargo market share along with
possible reduction in promoter pledge has been a
key re-rating trigger.

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 VALUATION
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DHD DIVIDEND YIELD

The board of directors have recommended a
dividend of ₹5 per equity share for the financial year
ended 31st March 2022.
This implies a dividend payout of 22% (v/s 20% in
FY21).

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 VALUATION
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DHD KEY LEVELS

APSEZ had given a breakout above ₹430 in Dec 2020
and exhibiting tremendous strength since then. It
made a new high of ₹901 in Jun 2021.
Thereafter, the stock corrected sharply but was able
to defend ₹650 on multiple occasions. After which it
was consolidating in the range of ₹650-₹760 zone,
however it breached this zone on the higher side and
made a new lifetime high of ₹925 in Apr 2022.
The zone of ₹650-₹700 would act a strong base for
accumulation. On the upside, the stock might go up
to the ₹1050-1150 zone and a breach of the same
would be required for further bullish momentum.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
Mr. Gautam S Adani is the chairman and managing
director of the company.
The management continues to focus on driving
growth through investment and acquisitions.
It is focusing on increasing Adani ports all India
market share and also wants to become one of the
most valuable port companies in the world by the
end of the decade.

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SHAREHOLDING
DHD PATTERN
The promoter group holds 65.55% stake in the
company. Promoter pledge stood at 13.44%.
In March quarter, FII have decreased their
shareholding to 14.26% and DII shareholding
decreased to 15.35%.
Top Public Shareholding:-
Life Insurance Corporation of India 9.92%
Camas Investments Pte. Ltd. 1.25%
SBI-ETF NIFTY 50 1.05%

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 QUALITY
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DHD SECTOR POTENTIAL

• The port sector plays a crucial role in the country’s economic empowerment. According to the ministry of shipping, around 95% of
India’s trading by volume and 70% by value is being carried out through maritime transport. (Source: Sagarmala, Ministry of
shipping).
• India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km. Most cargo ships that trade from
East Asia to Europe, America, Africa pass through Indian territorial waters.
• The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India has 12
major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will
be developed in the country.
• The Indian government plays an important role in supporting the port sector. It has allowed Foreign Direct Investment (FDI) of up
to 100% under the automatic route for port and harbour construction and maintenance projects.
• It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland
ports.

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 QUALITY
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COMPETITIVE
DHD LANDSCAPE
APSEZ is the largest private port company with total
capacity of 538 MMT and handles a diverse cargo
base.
Recent acquisitions of Krishnapatnam Port and
Gangavaram Port will strengthen APSEZ position in
the southern markets and accelerate towards 500
MMT cargo throughput by FY25.
The company’s listed peer is Gujarat Pipavav Port Ltd.
It is engaged in the business of port development
and operations at Pipavav Port.

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 QUALITY
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DHD FUTURE OUTLOOK

The management has given the following guidance for FY23:-
• The company expects to handle cargo volume of 350-360 MMT.
• Consolidated revenue expected to be in the range of ₹19,200-₹19,800 cr and consolidated EBITDA to be in the range of ₹12,200-
₹12,600 cr.
• Port revenue is anticipated to be in the range of ₹16,700-₹17,000 cr and Port EBITDA to be in the range of ₹11,600-₹12,000 cr.
Logistics to generate revenue of ~₹1,500-₹1,600 cr with EBIDTA margin of ~26%-27%.
• It is targeting cargo volumes of 0.5 billion, own railways track of 2,000 kms and warehousing capacity to 60 mn sq. ft. by FY25.
• The management anticipates Gangavaram port margin to improve to ~71%-72% after the acquisition is completed.
• The company would keep pushing for 1%-1.5% growth in overall company’s EBITDA margin.
• It is confident to grow its market share on the west side.
• Going forward, the management’s focus will be on driving better asset utilization, higher cargo growth through long term
contracts, cargo diversification and new tie-ups with shipping lines.
• The under-construction port of Vizhinjam in Kerala, along with the new terminal in Colombo, Sri Lanka, will act as a new
transshipment hub in southeast Asia.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
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DHD
Edge Meter Aspects Grade
Growth 4
Profitability 4
Efficiency 4
Solvency 3
Valuation 3
Quality 4
TOTAL 22

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

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DISCLOSURES
DHD
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the month immediately preceding the date of publication of the research report or date of the public appearance.
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