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Domestic brokerage Nuvama Institutional Equities continues to remain positive on Adani Ports & Special Economic Zone Ltd (Adani Ports) as it sees that development of Vizhinjam Port may turn out to be a major boost to volumes, once it is commercially operational around end of ongoing fiscal.
Adani Ports’s Vizhinjam transhipment hub witnessed its maiden berthing as cargo ship Zhen Hua 15 brought in cranes for the port’s development. The strategic transhipment port may turn out to be a major boost to volumes, given its close proximity to major international routes along with depth that can handle the biggest of vessels, said Nuvama.
The Vizhinjam port is an Rs 7,600 crore infrastructure project being implemented on a public-private partnership (PPP) model with funding from the state government of Kerala and Adani Ports.
The Vizhinjam transhipment port is naturally a mother-port given its depth of 24 metres, which makes it capable of handling huge vessels, a feature crucial for major ports. Apart from Vizhinjam, only the Mundra port, which has terminals of about 17-metre depth, can handle such larger vessels, but distance from international routes makes it difficult for Mundra from being a transhipment hub, said Nuvama.
Shares of Adani Ports and Special Economic Zone were trading flat, marginally up at Rs 792.95 on Friday, with a total market capitalization of Rs 1.71 lakh crore. The scrip is up about 85 per cent from its 52-week low at Rs 394.95.
Larger ships require more depth. However, most harbours along the Indian coastline are not deep enough to handle large vessels. Thus, larger ships generally skip Indian ports and usually dock at Colombo, Dubai and Singapore.
However, with a natural draft of 24 metres and close proximity to international trade routes, the Vizhinjam port can handle large container liners carrying 20,000-25,000 containers and act as a key transhipment hub. This puts Adani Ports in a sweet spot to grab a bigger share of the international maritime trade currently dominated by China, said the brokerage firm.
“We expect this to be margin-accretive for Adani Ports and help it achieve cargo volume of 500 MMT in FY25E. More importantly, capacity creation in the Mundra port and multifold expansion in warehousing capacity augur strong volume growth over FY23-25E. It continues to diversify and expand across the logistics value chain,” Nuvama added with a buy rating with a target price of Rs 958.
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