Analyst Corner: Retain ‘buy’ on Adani Ports as it expands warehousing operations


In our view, the WH business is a natural fit and logical extension of APSEZ’s growing logistics business. Maintain ‘buy’.

From port gate to customer door: Adani Ports’ (APSEZ) big plan for the warehousing (WH) segment is a key cog in its wheel of extending port gate operations: Key points: i) India’s WH segment is underpenetrated at 0.02mn sqm WH stock per capita (1/40th of China). ii) Acceleration towards e-commerce (31% mix) requires huge WH facilities for a robust supply chain, which bodes well. iii) APSEZ is targeting 60mn sqft of Grade A WH capacity in five years with ready-to-build capacity of 30mn sqft (including 10mn sqft inorganic). iv) APSEZ is targeting a premiumisation strategy as it targets value-added WH services with quality tenancy.

In our view, the WH business is a natural fit and logical extension of APSEZ’s growing logistics business. Maintain ‘buy’.

India’s WH industry is growing rapidly; new growth lever India’s warehousing industry is still at a nascent stage and much under-penetrated; it has expanded at a 20% CAGR over the last five years with the bulk of demand being driven by e-commerce as well as 3PL companies—accounting for ~62% of total demand in FY21 (~33% in FY17). In a post-pandemic period, companies are deeply focused on forming resilient supply chains, decentralization of global manufacturing and in city warehousing. This is likely to further accelerate e-commerce penetration and hence fuel growth for the WH industry. APSEZ’s mega play in the WH business is a natural fit for its overall operations and for becoming integrated logistics player.

Targeting 30% incremental market share with 30mn sqft WH in sight India’s WH is expected to more than double to 370mn sqft by FY26 and APSEZ targets to capture 60mn sqft capacity (150x growth) implying 30% incremental market share. This is possible given APSEZ’s 1850 acres of land bank which is equivalent to 19mn sqft WH and inorganic growth opportunity of 10mn sqft in the unorganised market. The company is focusing on only top 20 markets. Further, it targets to provide end to end service and value added services instead of plain storage facilities which could lend them higher realisations by `5-6sqft. It is focusing on quality tenancy and long term leasing model thus providing better revenue visibility.

Outlook and valuation: Strengthening logistics business; retain ‘buy’. The transport utility giant’s entry into the WH business bolsters its strategy of becoming a single-stop solution from port to customer premises. APSEZ plans to invest Rs 130bn in WH business and expects to generate Rs 20bn in Ebitda with an 18% RoCE or thereabouts.

In our view, while the monthly realisation target of Rs 30sqft looks aggressive, the company is targeting a premiumisation strategy w.r.t. tenancy/value-added services; hence it is a key variable to watch out for.

Overall, the WH business could contribute 8-10% to APSEZ’s FY26E Ebitda. We are yet to build in WH estimates and its contribution to our TP (Rs 20–25/share). In all, we maintain our positive stance as we believe volume growth momentum is likely to sustain and APSEZ’s scale, leadership and extended gate operations should enable it to exploit the opportunity. Maintain ‘buy’.

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