“ADSEZ has surprised us and the Street with the pace of new asset additions from the private sector and at reasonable valuations. We are looking at conditions that would enable ADSEZ to replicate the same for government sector projects on offer,” Kotak Institutional Equity said in a report.
Over the past two years, ADSEZ acquired assets worth Rs 300 billion in EV at a forward EV/EBITDA mix of less than 10X. Abroad, ADSEZ has also acquired Haifa Port, another asset won at a reasonable valuation, the brokerage said in its report.
The Kotak Institutional Equity report further states that ADSEZ is well positioned to add to the government’s assets. The company has added several assets in Haldia, Tajpur and is one of the two bidders for the Karaikal Port.
“We raise our overall volume/EBITDA assumption for the next two years by 6%/7% even after we take into account a 2-3% reduction in volume assumption for existing assets associated with weak growth prospects,” said Kotak Instuti Kuiti .
The stock is trading at a reasonable 13X FY2024E EV/EBITDA after recent poor performance, he said.
The higher EBITDA assumption reflects the consolidation of new asset additions at Ocean Sparkle and Haifa Port and the potential Rs 50 billion investment in new assets we are factoring in ADSEZ by FY2025, it added.
“Our revised estimates are now in an attractive environment with volume guidance of 500 million tonnes and EBITDA guidance of Rs 200 billion for FY2025. Our estimates factor in FY2020-25E volume CAGR of 6.5% and 8.7% for Mundra and the nine legacy assets. Asset additions since FY2020 help drive the five-year volume CAGR assumption to 15.8%,” he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)