Reduce Adani Ports - Geojit BNP Paribas

Reduce Adani Ports & SEZ – TP Rs.113

- Coverage is initiated on Adani Ports & SEZ with 'reduce' rating and with a target price of Rs.113 over one year. The stock is currently traded in the range of Rs.130.

- 'Reduce' rating on the stock is on expectation that the company's business volume would decline sharply in the near term and this would have downside risks to the street's estimates on the stock.

- Allegations of illegal transportation of iron ore against the promoter group may remain as an overhang on the stock valuation.

- The company had negatively surprised the market in 3QFY12 due to lower than expected volume. It is expected that the same trend would be continued for the next few quarters due to lighter volumes on committed coal and crude cargo.

- Interest on debt for acquisition and expansion may start impacting company's profitability and this is another worry.

- The stock is currently traded at 13% and 20% premium to its peers and this valuation is unlikely to sustain. Hence, the stock is rated to 'reduce' with a target price of Rs.113 over one year.

- Higher than expected volumes or realization, resolution of allegations on the promoter group and resolution of coal or iron ore related issues are the upside risks to the target price.

Source : Equity Bulls

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