Stock To Buy? Adani Group Stock That Saw Profits Grow 1600%, Cheap On Valuations

Revenue of Adani Power surge

The company reported a robust revenue for the first quarter of FY 2022-23, which was higher by a whopping 115% at Rs. 15,509 crore, as compared to Rs. 7,213 crore in Q1 FY 2021-22. This increase in revenue was aided by increase in Purchase Power Agreements (PPA) tariffs due to higher import coal prices and greater alternate coal usage, improved merchant and short-term tariffs, revival of 1,234 MW Bid-2 PPA with Gujarat DISCOMs, and higher prior period revenue recognition.

 

Net profits of Adani Power surge 16 times

The EBITDA of Adani Power for Q1 FY 2022-23 stood higher by 227% at Rs. 7,506 Crore, as compared to Rs. 2,292 Crore in Q1 FY 2021-22. EBITDA growth was aided by prior period income recognition, improved tariff realisation, and change in sales mix, partially offset by impact of higher fuel cost, increased operating expenses owing to acquisition of Mahan Energen Ltd., unfavourable foreign exchange movement, etc. The Profit After Tax for Q1 FY 2022-23 was Rs. 4,780 Crore, which was 16x higher than the corresponding figure of Rs. 278 Crore for Q1 FY 2021-22.

Electricity Demand and supply

A nation-wide heatwave and broadening of the recovery in economic activity continued to drive electricity demand growth in the first quarter of FY 2022-23. According to Adani Power, aggregate energy demand for Q1 FY23 was 404.8 Billion Units (BU), registering a growth of 18.6% over the energy demand for Q1 FY22. This led to peak power demand scaling further heights and reaching a record level of 215.9 GW during the quarter. On the other hand, this sharp increase in power demand could not be matched by coal availability due to domestic shortages and high prices of imported coal, leading to peak power deficit of 4% and energy deficit of 1%.

How Adani Power stock has performed?

The stock of Adani Power hit a 52-week high of Rs 362.30 on Aug 17. In fact, the stock was seeing only buyers on the counter and hit the upper end of the circuit filter. The circuit filter limit on the stock at the moment is 5%. The shares of the company has rallied from levels of Rs 63 to the current levels. This means it has given more than 6 times returns to its shareholders.

Should you buy the stock of Adani Power?

For the quarter ending June 30, 2022, the company reported an EPS of Rs 11.58, which leaves the company with a potential to do an EPS of Rs 47 in the current financial year. If you see the stock is trading at Rs 362, with barely 10 times discounting. Having said that the Adani stocks can be risky, given the volatility in their prices. It's hard to say whether there would be further stock gains from here.

Markets are extremely high now

Apart from this, the markets have also reached 60,000 points on the Sensex, which leaves very little room for an upside. So, a buy on dips investment strategy at the moment would be the right one.

About Adani Power

Adani Power. a part of the diversified Adani Group, is the largest private thermal power producer in India. The company has an installed thermal power capacity of 13,610 MW spread across seven power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, Chhattisgarh, and Madhya Pradesh, apart from a 40 MW solar power plant in Gujarat.