Recommendation From Trading Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

Here is Why:

Adani Enterprises approval of coal project in Australia

Solar power push

Venturing in defence production

Infrastructure sector is the key driver for the Indian economy. The sector is highly responsible for propelling India’s overall economic growth and it enjoys intense attention of the current government. Infrastructure sector includes power, both conventional & non-conventional sources, extraction of resources, transmission services of gas & electricity, urban infrastructure development along with agro progress.

India would need in excess of USD 500 billion to spend on infrastructure development on key sectors namely power, agro and urban infra over the next five years. Therefore, Adani Enterprise fits the bill perfectly in order to take advantage of this massive opportunities arising out of these current infrastructure projects and all the future ones as well.

Adani Enterprises Limited is an infrastructure company, a flagship entity of the Adani group which was the erstwhile Adani Exports Limited. The Company is engaged in coal trading, coal mining, oil & gas exploration, transmission and gas distribution. Its segments include Trading, Power, Agro and Others. Adani Enterprises is a trading firm dealing in myriad commodities. Over a period of time, coal has become its main stay and after it emerged as India’s leading coal importer, it has ventured into multiple sectors as forward and backward integration.

Among businesses, this led Adani Enterprises into city gas distribution through the supply of PNG and CNG, bunkering business at various ports in the east and west coasts, coal mining and pioneering as Mine Developers and Operators (MDO) for many state electricity public sector units which were allocated captive coal blocks and solar energy generation through large solar power plants. Under the agro business basket, Adani offers a range of edible oil products. It operates agro business through Adani Wilmar Limited.

Adani Enterprises recently concluded final shareholders’ agreement on landholder compensation agreement for its USD 7.45 billion coal mine project in Queensland, Australia. It’s a big positive for the company going forward.

In a separate development Adani Enterprises’ wholly owned subsidiary Adani Aero Defence Systems & Technologies and NASDAQ listed Alpha Design Technology have signed the statement of intent to cooperate and work together in the field of Unmanned Aircraft Systems (UAS) in India, aligned to the government’s ‘Make in India’ initiative.

On financial front, the net revenue from operations of company reached Rs 10,408 crores in Q3FY16 compared to Rs 17,849 crores in Q3FY15 a decrease of 41.69 per cent year on year (YoY). The EBITDA stood at Rs 467 crores this quarter compared to Rs 3265 crores in Q3FY15, a decrease of 85.69 per cent YoY. The EBITDA margin stood at 4.49 per cent in Q3FY16 compared to 18.29 per cent same period last year. The net profit for the quarter stood at 196 crores compared to Rs 444 crores same period last year, a decrease of 55.89 per cent YoY. The net profit margin stood at 1.88 per cent this quarter compared to 2.49 per cent in Q3FY15.

Last year Adani Exports Limited got demerged into three separate entities namely Adani Ports and SEZ, Adani Transmission and Adani Enterprises. Therefore, the financials of Adani Enterprises are not comparable on a yearly basis due to the demerger effect.

On valuation basis, the stock of company is trading at trailing twelve month (TTM) P/E of 15.80 compared to industry P/E of 15.90.