A tight ship

Good margins, reasonable valuation and low debt levels make the stock a good bet

- KEERTHI SANAGASETTI

The current economic slowdown has largely been driven by weak domestic manufacturing activities. But a slowdown in other global markets and a decline in the global trade are also hurting the Indian economy.

Hence, Indian ports have been witnessing a drop in volumes this fiscal. Consequently, the investor sentiment around ports and logistics-related stocks has taken a beating.

But the correction has also opened up pockets of opportunities for those looking to invest with a long-term perspective. Adani Ports and SEZ (APSEZ),the market leader in terms of both installed capacity and_ the throughput (cargo volumes) handled, is available at reasonable valuation.

The stock of APSEZ has corrected by about 11 per cent (from its peak in June 2019) due to declining port volumes across the country. While the stock did see some intermittent rally on account of share buyback in September 2019, the euphoria was short-lived. The stock plummeted 14 per cent following weak Q2 numbers across the logistics space. However, the company continued to post numbers above the industry average, which is a key positive.

That aside, low-debt levels, good margins and capacity additions through the inorganic route (acquisition of Krishnapatnam port) make it a strong bet for the long term. The stock is currently trading at 17.5 times its FY20 (projected) EPS (earnings per share), which is at a discount to its three -year average of 19.6 times.

Krishnapatnam port buy