Adani Power: Analyst Review Analyzed

Key Points

• Antique analysts rate Adani Power ‘Buy’ with strong growth prospects.
• Power demand in India is rising significantly, fueling expansion plans.
• Adani Power is winning contracts, securing 70% of new capacity.
• Long-term agreements ensure stable fuel supply and revenue.
• Expansion projects are efficient, cutting costs and timelines.
• Analysts predict strong revenue and profit growth over the next decade.

Antique Stock Broking has initiated coverage on Adani Power Ltd., assigning it a ‘Buy’ rating. This decision is based on several optimistic factors, primarily driven by the company’s projected growth and strategic advantages within the Indian power sector.

Growth Drivers

The analyst team believes Adani Power is poised for substantial growth due to increasing electricity demand in India. They specifically highlight a 6% compound annual growth rate (CAGR) in electricity demand from FY2022 to FY32. This demand is fueled by things like more electric cars, data centers, and increased manufacturing.

Furthermore, Adani Power is winning the race for new power projects. They’ve secured approximately 70% of recently awarded capacity – a total of 12.4 Gigawatts (GW) out of 17.7 GW. This competitive advantage is largely due to their cost-effectiveness and successful project execution.

The company’s expansion plans are also strategically designed. They’re focused on brownfield projects, meaning they’re upgrading existing power plants. This approach significantly reduces costs – about ₹80 million per megawatt – and shortens the construction timeline to roughly 3.5 years, compared to the typical 5-6 years for government-led projects.

Crucially, Adani Power has secured long-term power purchase agreements (PPAs) covering 90% of its operational capacity and 67% of the total 41.9 GW portfolio. These agreements provide predictable revenue and ensure fuel security through Shakti-linked fuel supply agreements. This effectively locks in demand and mitigates risks.

Looking ahead, Antique estimates revenue, EBITDA, and profit after tax will grow at 16%, 19%, and 17% annually respectively over the next decade (FY25-32). They expect the company to fund around 60% of its massive ₹2 trillion capital expenditure pipeline using its own earnings, leading to a decrease in debt and sustained profitability.

The analyst values Adani Power at 15 times its FY28 EBITDA, utilizing a discounted cash flow valuation. This suggests the stock is currently undervalued considering its long-term growth potential, expanding margins, and dominant PPAs. Their target price is ₹187 per share, representing a 30% upside from its Monday closing price.

“Adani Power’s strategic focus and robust growth prospects position it as a key player in India’s expanding energy market.”

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