Daily Brief India: Adani Ports & Special Economic Zone, Nesco Ltd, Kolte Patil Developers, Vedanta Resources and more

Adani Ports and Special Economic Zone’s (APSEZ) FY 2022-23 results were in line with expectations, with revenue and EBITDA exceeding management’s guidance. That said, cargo volume growth slightly missed estimates. Leverage was largely stable (despite heavy outlays for acquisition and capex), thanks to strong earnings improvement. For FY 2023-24, we anticipate the company will generate FCF of INR 50-60 bn, assuming APSEZ does not make any material new acquisitions.

Management reiterated that the company’s priority is to deleverage in FY 2023-24, and guided for Net Debt/EBITDA to improve to 2.5x (from 3.1x in FY 2022-23). There are recent media reports that the Adani Group has committed to USD 10 bn of investments in Vietnam. Management clarified that the investments are meant to be carried out over the medium to long term.

We believe the fallout for Adani Group from Hindenburg Research’s short-sell report in late January 2023 is largely over. We view positively that the group has been addressing some of Hindenburg’s allegations by reducing leverage and raising equity to repay share-backed loans.

• As projected, Nesco’s BEC business has completely normalized and clocked INR 45cr+ revenues in Q4FY23. With this, Nesco clocked FY23 PAT of INR 290cr+, well above our INR 250cr+ estimate.
• Alongside the BEC business, Nesco’s foods business has also seen significant recovery led by footfalls from the BEC. Independent of BEC also, Nesco Foods is growing significantly on its own.
• Nesco is on track to earn PAT of INR 320cr+ for FY24, suggesting that at the current market cap of INR 4250cr, it is valued attractively at 13x P/E.

• Kolte Patil delivered on the optimistic expectations for Q4FY23 which led to a stellar close for FY23 with all-time-high pre-sales and robust deliveries.
• Its flagship project, Life Republic, was at an inflection point as outlined in our original thesis. It contributed immensely in FY23 and is now all set for accelerated growth.
• Despite high base of FY23, Kolte Patil is all set to post a strong FY24 with 25% pre-sales growth, led by new launches and strong sustenance sales.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Vedanta Resources