Adani Portfolio: Energy Stock Has Potential Of 45% Upside In 24 Months, Massive Target Of Rs 1,600

Adani Group Portfolio: Billionaire Gautam Adani-backed power distribution company, Adani Energy Solutions is a powerpack stock to buy as its stock is forecasted to see around 45% upside in the next two years. Ventura Securities has recently recommended BUY in Adani Energy. This Adani company is seen to become a one-stop solution provider in the power sector.

On April 5th, Adani Energy's share price was at Rs 1,096.95 apiece with a market cap of Rs 1,22,363.97 crore. YTD, the stock is up 4%, but its six-monthly performance is healthy with gains of nearly 41%.

Adani Energy Solutions Share Price Target:

In its latest research note, Ventura Securities highlighted that Adani Energy Solutions Ltd (AESL) stands out as the premier private T&D entity, managing 20,422 circuit kilometres (ckm) of transmission lines and 54,600 MVA of power transformation capacity. The company has set a goal to establish 30,000 ckm of transmission lines by 2030, capitalizing on both organic & inorganic growth prospects.

Further, AESL is India's leading private sector power transmission company with over 35% market share in TBCB-based private power transmission assets. With its superior execution and O&M skills, AESL has demonstrated a high 'total availability factor' of 99.7%, best-in-class EBITDA margins of more than 91% and capital management excellence. As of Jan 2024, the company had 37 transmission assets (28 operational & 9 under construction). These assets have a weighted average lifespan of 33 years and generate fixed/ROA-based annual tariffs, offering long-term visibility for revenue and cash flows, as per the brokerage.

Also, according to Ventura, the government's push to double the power generation & transmission infrastructure along with the replacement of older low KVA lines with higher KVA lines ensures strong growth visibility for AESL's power transmission business. The Indian government is expected to open bidding for INR 10 trillion worth of power transmission lines in the next 10 years. Out of this, 50% is expected to be allocated to private companies through the TBCB route.

As a result, Ventura's note said, "Over FY23-27E, we expect the company's power transmission revenues and EBITDA to grow at a CAGR of 18.7% and 19.7% to INR 7,822 cr and INR 6,649 cr respectively." Thereby, on the valuation, the brokerage added, "We value AESL at 17X EV/EBITDA and recommend BUY with a target price of Rs 1,600."

In its distribution business, AESL serves more than 12 million consumers in metropolitan Mumbai and the industrial hub of Mundra SEZ. AESL is ramping up its smart metering business and is on course to become India's leading smart metering integrator. AESL, with its integrated offering through the expansion of its distribution network through parallel licenses and competitive and tailored retail solutions, including a significant share of green power, is revolutionizing the way energy is delivered to the end consumer.

AESL is a catalyst for transforming the energy landscape in the most reliable, affordable, and sustainable way.

In Q3FY24, Adani Energy witnessed double-digit growth of 19% in consolidated revenue to Rs 3,615 crore on YoY, on account of the newly commissioned transmission projects and higher energy consumption in the distribution business. Meanwhile, a comparable PAT of Rs 281 crore was 1% higher, supported by miscellaneous income of Rs 136 crore and lower finance costs in AEML. The operational EBITDA increased by 10.4% to Rs 1,454 crore for the quarter. On operational parameters, it was a strong quarter with an average system availability of over 99.7%.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.