Analysts Corner: Keep the ‘buy’ on Adani ports as it expands warehousing operations


In our opinion, the WH activity is a natural and logical extension of the growing logistics activity of APSEZ. Maintain “buy”.

From Port Gate to Customer Gate: Adani Ports (APSEZ) Large Plan for Warehousing (WH) Segment is a key cog in its expansion wheel of Port Gate operations: Points Key: i) India’s WH segment is underpenetrated at 0.02 m² of WH stock per capita (1 / 40th of China). ii) The acceleration towards e-commerce (31% mix) requires huge WH facilities for a robust supply chain, which bodes well. iii) APSEZ is targeting 60 million square feet of WH Grade A capacity over five years with a ready-to-build capacity of 30 million square feet (including 10 million inorganic square feet). iv) APSEZ targets a premiumisation strategy because it targets value-added WH services with quality rental.

In our opinion, the WH activity is a natural and logical extension of the growing logistics activity of APSEZ. Maintain “buy”.

India’s world heritage industry is growing rapidly; new growth driver The warehousing industry in India is still in its infancy and has very little penetration; it has grown at a 20% CAGR over the past five years, with most of the demand driven by e-commerce as well as 3PL companies, accounting for around 62% of total demand in FY21 (around 33% in fiscal year 17). In a post-pandemic period, companies are deeply focused on forming resilient supply chains, decentralizing global manufacturing, and warehousing in cities. This is likely to further accelerate the penetration of e-commerce and thus fuel the growth of the World Heritage industry. APSEZ’s mega-game in WH business is a natural fit for its overall operations and to become an integrated logistics player.

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Target 30% additional market share with 30 million square feet of WH in sight India’s WH is expected to more than double to 370 million square feet by FY26 and APSEZ aims to capture 60 million capacity square feet (150 times growth), which implies an additional 30% market share. This is possible given APSEZ’s 1,850 acres of land, which equates to 19 million square feet of WH and a 10 million square foot inorganic growth opportunity in the unorganized market. The company focuses only on the top 20 markets. In addition, it aims to provide end-to-end service and value-added services instead of simple storage facilities that could lend them higher achievements of 5-6 square feet. It focuses on a quality rental and long-term rental model thus offering better visibility of revenues.

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Outlook and valuation: Reinforcement of logistics activity; retain “buy”. The entry of the transport utilities giant into the WH business reinforces its strategy of becoming a one-stop solution from the port to the customer’s premises. ASEZ plans to invest 130 billion rupees in WH’s business and expects to generate 20 billion rupees in Ebitda with a RoCE of 18% or so.

In our opinion, while the monthly achievement target of Rs 30 square feet appears aggressive, the company is targeting a strategy of premiumisation over rental / value-added services; it is therefore a key variable to watch.

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Overall, the WH activity could contribute 8-10% to APSEZ Ebitda FY26E. We still have to integrate the estimates of WH and its contribution to our TP (Rs 20-25 / share). Overall, we maintain our positive position as we believe that the volume growth momentum is likely to continue and that APSEZ’s scale, leadership and extended door operations should enable it to leverage the opportunity. Maintain “buy”.

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