Adani Enterprises hits record high on healthy outlook; rallies 11% in July

In the past six months, it has surged 28 per cent as against 12 per cent decline in the S&P BSE Sensex

Shares of Adani Enterprises (AEL) hit a record high of Rs 2,422.75 after they rose 2 per cent on the BSE in Friday's intra-day trade, gaining 3 per cent in two days, on healthy outlook. The stock surpassed its previous high of Rs 2,420, touched on April 27, 2022.

Thus far in the 11 trading sessions of July, the stock has rallied 11 per cent as compared to 1 per cent gain in the S&P BSE Sensex. Moreover, in the past six months, it has surged 28 per cent as against 12 per cent decline in the benchmark index.

AEL is one of the fastest growing diversified businesses providing an extensive range of products and services. The Company operates as an incubator, establishing new businesses in transport & logistics and energy & utility sectors, apart from increasing its focus on direct-to-consumer businesses. AEL incubated and listed on the bourses businesses like Adani Ports, Adani Power, Adani Transmission, Adani Green Energy, Adani Gas and Adani Wilmar.

AEL is leading decarbonization of industries and mobility through Adani New Industries Limited (ANIL). Other next-generation of AEL’s strategic business investments are centered around airport management, roads, data center and water infrastructure which has significant scope for value unlocking.

AEL had reported a strong financial performance for January-March quarter (Q4FY22), with earnings before interest, taxes, depreciation, and amortization (EBIDTA) increasing 44 per cent to Rs 1,538 crore due to higher contribution from Airports business on the back of MIAL consolidation. Total Income increased by 84 per cent to Rs 25,142 crore on account of improved realization due to higher prices in Integrated Resources Management (IRM) segment.

Apart from ANIL, AEL's other incubating businesses, in the domains of Airports, Data Centers, Roads and Defence are on the verge of gaining traction and should be value accretive in the short to medium term. AEL's new incubating forays into copper and green PVC have significant drivers in place to ensure long-term profitability and the equity contribution is expected to be funded from internal accruals.

"For FY22-25E, AEL's Ebitda and net profit are expected to grow at a CAGR of 80.7 per cent and 107.3 per cent to Rs 21,903 crore and Rs 6,917 crore, respectively, while Ebitda and net margins are expected to improve by 1,312 bps to 18.5 per cent and 471 bps to 5.8 per cent, respectively due to the rise in contribution from the new high margin businesses," according to analysts at Ventura Securities.

The brokerage firm believes that a demerger of the incubating business can result in significant value unlocking and is an upside risk to their estimates. "We expect the airport business to be the next value-unlocking story that should play out over the next couple of years," the brokerage firm said in latest report.

AEL is one of India's largest listed incubators which have conceived, grown, matured and demerged many successful businesses such as Adani Ports & SEZ (in the year 2007), Adani Power (in 2009), Adani Transmission (in 2015), Adani Green Energy (in 2018), Adani Total Gas (in 2018) and Adani Wilmar (in 2022). Each of these listed entities has themselves emerged as leaders in their respective sectors, the brokerage firm said.