Adani Ports: Analysts Provide Some Views on Rehabilitation Potential

APSEZ shares have had a sharp correction of about 26% from its recent peak at ₹1,621 now trading around ₹1,200. Despite the correction in stock prices, it is still 15% up for the year. The fall of late is partly on account of allegations leveled against the broader Adani Group and has thus made this stock raise questions as regards future prospects for attractiveness in investment.
Matt Orton, Chief Market Strategist at Raymond James Investment, spoke to CNBC recently on the outlook for the stock. Though cautious on the need to increase exposure to Adani Ports, he also highlighted fundamental strengths that would help in a recovery.

Cautionary optimism amidst controversy

Orton has noted that the various probes done on the Adani Group, including the one by the US Department of Justice or DoJ and Securities and Exchange Commission or SEC, did not trigger massive foreign institutional selling that had been feared in some quarters. “The fact that we haven‘t seen a massive sell-off by foreign institutions in Indian markets is encouraging,” he added.

There reportedly are net buyers in Indian cash market for the past three sessions. Apart from this, the infra-focused business model of the company did indeed offered measure comforts to investors.

A standalone investment case for Adani Ports

Orton told CNBC the big takeaway from the stock was viewing it as a stand-alone business from the bigger Adani Group. “It is a name I wouldn‘t be adding to positioning at the moment but not one to sell off at these bottoms,” he said, partly due to the space which it holds in the larger infrastructure industry that’s also an attractive investment theme.
The diversified port portfolio, substantial cash flows, and significance to India‘s logistics and trading networks represent robust fundamentals in themselves. Orton identifies that these factors are not closely related with the legal challenge the Adani Group faces at a group level.

Timeline to Rebound

While Orton was cautious not to sound too optimistic, he did suggest that there may be some hope in the near term. “Once there’s more clarity and we get through another earnings season, buying the dip will become attractive,” he said. The ability of the company to deliver strong operational and financial results will be the key to restoring investor confidence.

Market analysts are positive

Of the 18 analysts covering Adani Ports, 16 recommend “buying” and the rest, holding. No analyst currently recommends a “sell” rating on the stock. This is an indication that analysts believe the company is going to overcome the immediate challenges to sustain its long-term success.

Adani Group Offers Assurance To allay investor fears, the Adani Green Energy issued a clarification last week in an exchange filing stating that there was no charges against three key group leaders Gautam Adani, Sagar Adani, and Vneet Jain for violating the Foreign Corrupt Practices Act. This clarification did provide some respite to Adani Group stocks as they were able to rebound over the last two trading sessions. Conclusion: Watching for Catalysts Adani Ports stocks are definitely a strong buy for any investor in infrastructure growth. Caution remains as there is still time to witness many controversies still swirling around the parent group. Combination of long-term fundamentals and improvement in investor sentiment make this a pretty good investment proposition for the future months ahead. Investors should track the financials, as well as updates about regulatory or legal issues. Patience for now should be patient because Adani Ports is under increased scrutiny.

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