I was just going through my past reports & found that my previous post on Adani Ports & SEZ Ltd was in March'2015 (Click Here for that report). The share price of the company was trading just above the Rs.300 mark and was enjoying a P/E multiple of almost 30. I had mentioned in that report that I expect the company to post a business growth of 20% quite comfortably in coming few years. We have seen 7 quarterly results since writing that report. During this period, Adani Ports & SEZ Ltd has seen it's Trailing-Twelve-Months Total Income grow by about 36% & it's Net Profit grow by almost 60%. The business performance has clearly not disappointed. But have a look at the way Adani Ports' stock price has behaved during this period in the following chart:
From around Rs.300 levels in March'15, Adani Ports' stock went on to hit highs of around Rs.360 in August'15, but surprisingly saw a 50% erosion in price in the following six months to hit lows of around Rs.180 by February'16. I can imagine 2 possible reasons for this surprising price correction: (1) Around the end of FY'15, the Adani Group had undergone Equity Capital restructuring, where shareholding of Adani Enterprises Ltd in other group companies was cancelled and it's shareholders were directly issued shares of each of those group companies. Some of those Investors who got shares of Adani Ports in that restructuring, might not be interested in being invested in the Ports business and could have sold their stake in those 6 months period. (2) The way the leading Opposition Parties in our Political arena were repeatedly playing up Adani Group's name as being an undeserving beneficiary of Modi Government, might have made some more investors nervous during that period, leading to added selloff.
After consolidating within a range for a few months after February'16, Adani Ports' stock price has finally started regaining strength, especially post announcement of June'16 Results. Have a look at the Trailing-Twelve-Months charts of Adani Ports' financial numbers to get an idea of the company's performance:
The growth in Adani Ports' Total Income & EBITDA has been healthy, while the growth in Net Profit has been much stronger over the last few quarters, mainly because it got added boost via lowering of the company's Interest Costs. Change in Interest Cost also reflects the company's improved Cash Flows & Capital management. Going by the improving business fundamentals of Adani Ports, it was just a matter of time before the stock price started reflecting it.
As of September'16, Adani Ports' T-T-M EPS stands at Rs.16.83/-. That means at the current share price of around Rs.290/-, it is enjoying a P/E multiple of only about 17. With the kind of growth potential the company enjoys, I certainly think that Adani Ports deserves a much higher market valuation. I would be looking forward to this company's stock enjoying P/E multiples of atleast about 25 to 30, if not higher. Hence I won't be surprised to see this stock trading at around Rs.500 or higher sometime in 2017. I may not recommend selling this stock even at that price. We just need to keep monitoring it's business performance on quarterly basis.
From around Rs.300 levels in March'15, Adani Ports' stock went on to hit highs of around Rs.360 in August'15, but surprisingly saw a 50% erosion in price in the following six months to hit lows of around Rs.180 by February'16. I can imagine 2 possible reasons for this surprising price correction: (1) Around the end of FY'15, the Adani Group had undergone Equity Capital restructuring, where shareholding of Adani Enterprises Ltd in other group companies was cancelled and it's shareholders were directly issued shares of each of those group companies. Some of those Investors who got shares of Adani Ports in that restructuring, might not be interested in being invested in the Ports business and could have sold their stake in those 6 months period. (2) The way the leading Opposition Parties in our Political arena were repeatedly playing up Adani Group's name as being an undeserving beneficiary of Modi Government, might have made some more investors nervous during that period, leading to added selloff.
After consolidating within a range for a few months after February'16, Adani Ports' stock price has finally started regaining strength, especially post announcement of June'16 Results. Have a look at the Trailing-Twelve-Months charts of Adani Ports' financial numbers to get an idea of the company's performance:
The growth in Adani Ports' Total Income & EBITDA has been healthy, while the growth in Net Profit has been much stronger over the last few quarters, mainly because it got added boost via lowering of the company's Interest Costs. Change in Interest Cost also reflects the company's improved Cash Flows & Capital management. Going by the improving business fundamentals of Adani Ports, it was just a matter of time before the stock price started reflecting it.
As of September'16, Adani Ports' T-T-M EPS stands at Rs.16.83/-. That means at the current share price of around Rs.290/-, it is enjoying a P/E multiple of only about 17. With the kind of growth potential the company enjoys, I certainly think that Adani Ports deserves a much higher market valuation. I would be looking forward to this company's stock enjoying P/E multiples of atleast about 25 to 30, if not higher. Hence I won't be surprised to see this stock trading at around Rs.500 or higher sometime in 2017. I may not recommend selling this stock even at that price. We just need to keep monitoring it's business performance on quarterly basis.
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