Global brokerage firm Cantor Fitzgerald has initiated coverage on Adani Enterprises with an ‘Overweight’ rating and sees substantial upside potential for the flagship company of the Adani Group. In its first ever report on an Indian company, Cantor Fitzgerald has projected a 50% rise in Adani Enterprises’ share price over the next 12 months. The bullish outlook comes on the back of Adani Group’s expanding portfolio of infrastructure businesses which are well positioned to benefit from India’s capex push. 

Cantor Fitzgerald analyst Brett Knoblauch believes the Airports business housed under Adani Enterprises holds significant promise to unlock value for shareholders in the future. In an exclusive interaction with CNBC-TV18, Knoblauch said the Airports vertical is expected to be the best performing segment for Adani Enterprises over the medium term. He expects the Airports business to generate over $1 billion in EBITDA within 3-4 years, given the strong growth in passenger traffic and cargo volumes post the pandemic.

Owing to the high growth potential and stable cash flows, Knoblauch sees the Airports business being separated from the parent company via a demerger within 5 years. This could unlock tremendous value for Adani Enterprises investors. The analyst estimates the standalone valuation of just the Airports business at around Rs. 1,622 per share, which is equivalent to nearly $20-25 billion in market capitalization terms. A successful demerger of this scale would allow investors to separately evaluate the execution capabilities and potential of Adani Enterprises’ airport management and development business.

In addition to Airports, Cantor Fitzgerald is bullish on Adani Enterprises’ other new economy businesses like Green Hydrogen. However, Knoblauch acknowledges the opportunities in green energy have not been priced in as yet. The brokerage sees significant headroom for re-rating as these new ventures start contributing meaningfully to Adani Enterprises’ revenue and profitability over the coming years. 

Currently, Adani Enterprises’ shares are trading close to pre-Hindenburg report levels of Rs. 3,400 apiece. On the first day of Cantor Fitzgerald initiating coverage, the stock surged over 6% on the NSE. The brokerage’s bullish stance is based on the expectation that Adani Group will be a prime beneficiary of India’s large infrastructure spending over the next decade. Knoblauch described Adani Enterprises as a ‘too big to ignore’ conglomerate, highlighting the synergies between its businesses and the economy’s needs.

While concerns around debt levels and governance standards linger, Cantor Fitzgerald believes the risk-reward is favourable for investors with a medium to long term view on Adani Enterprises. Successful execution of the airports and green energy plans as envisioned could lead to further upward revisions in the target price. The indications of an impending demerger of the high growth airports vertical also make the stock an attractive proposition for value creation over the next 5 years.