JPMorgan bullish on port sector; initiates 'OW' on Adani Ports, JSW Infra

JPMorgan has initiated coverage on Adani Ports and JSW Infra with an 'Overweight' rating

Global brokerage firm JPMorgan has initiated coverage on Adani Ports and Special Economic Zone and JSW Infrastructure with an 'Overweight' rating, saying India’s ports and logistics sector offers structural growth opportunities. 

It has set a target price of ₹1,944 on Adani Ports, based on 17x FY28 estimated Ebitda. On JSW Infra, the brokerage has set a target price of ₹310, based on 16x FY28 estimated EBITDA. 

Adani Ports shares closed 3.8 per cent higher at ₹1,489.20 in the previous session, while JSW Infra surged more than 6 per cent to settle at ₹262. 

It said that high entry barriers, ongoing industry consolidation, mature assets and the pricing power of established players support its bullish outlook. Additionally, further momentum in the sector is expected from capacity expansion, increasing trade volumes, and improvements in efficiency. 

According to JP Morgan, despite stock price outperformance with Adani Ports and JSW Infra rallying 70 per cent and 68 per cent, respectively, vs Nifty 50 over the past three years, "these attributes of the sector are still not well appreciated and factored into stock prices."  READ | L&T up 3% after 9% fall amid West Asia crisis; brokerages retain 'Buy' call

Adani Ports

It expects Adani Ports' revenue, Ebitda and profit after tax (PAT) to grow at 17 per cent, 15 per cent and 16 per cent, respectively, at a CAGR over FY25-FY28E. 

Adani Ports, part of the diversified Adani Group, is the largest private commercial ports operator in India, having a network of 15 ports in the country and four outside. In February, the company posted strong operational numbers as it handled 42.5 million metric tonnes of cargo, registering a 16 per cent Y-o-Y increase.

JSW Infra

On JSW Infrastructure, it said that the company is backed by strong execution capabilities of the JSW group and business relationships with group companies, and is on track to more than double capacity to 400 million tonnes per annum (MTPA) by FY30. Its revenue, Ebitda, PAT are projected to grow at 38 per cent, 30 per cent and 21 per cent CAGR over FY25-FY28E. 

JSW Infrastructure is the second-largest private port operator in the country with a network of 10 ports, along with two additional port terminals under an Operations & Maintenance (O&M) agreement in the UAE.  READ | RIL correction amid Iran war 'overdone', says JM Financial; eyes 29% upside

Ports and logistics sector direct proxy for GDP growth

 

JP Morgan said that India’s ports and logistics sector stands as a direct proxy for the nation’s trade and GDP growth, handling 95 per cent of merchandise trade by volume and 70 per cent by value. With seaborne cargo growing at a 5-6.5 per cent CAGR, the "sector is structurally positioned to grow."

 

"On a 10 year rolling basis, total port cargo in India has grown at ~0.75x to 0.8x of GDP growth. Given long-term GDP growth expectations of 6.5 per cent - 7.5 per cent, India's port cargo volume should be able to grow at 5 per cent to 6.5 per cent CAGR, providing a structural volume growth opportunity," it said.

 

Government-backed initiatives such as Sagarmala, Maritime India Vision 2030, and Amrit Kaal Vision 2047 collectively target a near quadrupling of port capacity by 2047, underpinned by over 800 projects, rising budget allocations, and a favorable policy backdrop.

 

"Adani Ports and JSW Infra are both well positioned to capitalise on the growth opportunity with strong profitability," the brokerage said.