back to the original question, how to conquer portugal?
having played portugal twice, once with spain as ally and once waging war against it (succesfully) i have some experience at defending it.
being rather compact in size its easy to defend from both land and sea, it only has one harbor, which is also the capitol so naturally its likely heavily defended and fortified. making a landing in the city very tough.
the greatest risk for portugal, especially early in the game is spain, since it isnt all strange for spain to have german units and portugal is almost bound to have british or american units. thus having a disadvantage in firepower on the ground.
lets assume i'm spain and at the start of the game already intending to attack portugal. I'd pick German or British units and execute a two-pronged attack on portugal as soon as I can manage, before portugal can dig itself in, aimed at oporto and castelo branco. If using british units i'd also try to execute a naval bombing of lisbon in an attempt to destroy as much industry as possible. (ya might be lucky and possibly destroy 50% of portugals armament factories)
Portugal is bound to be able to counter attack, so it might be wise to hold (or create) a third force in reserve. always keep an army in reserve there are many places were portugal can counterattack into spain.
Being small, portugal likely will be just one AIC, collapse the AIC and prevent portugal from restoring it and you'll have severely limited where portugal can build new divisions.
Expect the conquest of Lisbon to be an extended siege, cripple portugal by keeping the pressure up, before beginning the siege.
a sea attack on portugal is a completely different story, there are much easier targets for a sea attack in the vicinity and i'd avoid it if possible.
have fun.