Nomura upbeat on private port players; bets on JSW Infra, Adani Ports

Nomura has initiated coverage on JSW Infrastructure and assumed coverage on Adani Ports; here's why

Nomura has initiated coverage on JSW Infrastructure and assumed coverage on Adani Ports & SEZ with ‘Buy’ ratings, setting target prices of ₹340 and ₹1,850 per share, respectively. The brokerage is upbeat on Indian private port players, noting they are exceptionally well-positioned to capture a larger share of the nation's total cargo traffic.

Formidable entry barriers and limited competition

India’s domestic ports sector operates within a structurally favorable competitive landscape. Formidable entry barriers—including high capital intensity, extended project gestation periods, and complex regulatory requirements—limit the influx of new private players. Additionally, the specialized expertise required for efficient cargo handling and evacuation acts as a strong deterrent to fresh competition. Nomura expects these constraints to persist, allowing incumbent private operators to maintain their dominant market positions.

 

Financial superiority over state-run peers

Private port operators continue to outperform state-backed major ports by leveraging integrated operations, scale efficiencies, and higher levels of mechanisation. The absence of legacy liabilities, such as heavy pension obligations, further strengthens their balance sheets. 

As a result, these players generate materially stronger financial metrics, including:

• Operating margins: 55–60 per cent range.
• Return on Capital Employed (RoCE): 12–13 per cent.
• Valuation: Premium multiples compared to global peers, supported by a superior growth trajectory.

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Structural shift to waterways

A key pillar of Nomura’s bullish stance is the ongoing modal shift in India’s logistics landscape. While roadways currently dominate with a 66 per cent share of freight, they remain less cost-efficient than railways and waterways. 

With water transport currently accounting for only 7 per cent of India’s logistics spend, the brokerage sees significant room for expansion. Furthermore, ports handle 95 per cent of India’s Export-Import (EXIM) trade by volume—a figure unlikely to change due to the lack of viable alternatives.

Traffic growth and containerisation

Indian port traffic is projected to expand at a 4.7 per cent compound annual growth rate (CAGR) through FY30, largely mirroring the steady growth seen over the past five years. Within this, container cargo is expected to grow at a healthy pace, driven by its inherent benefits—such as lower pilferage and greater ease of transportation—and currently low market penetration. 

Disclaimer: Views and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Reader discretion is advised.