Rs 65-To-Rs 1,800; This Green Energy Stock Of Adani Group Is Advised To Buy For Strong 42% Gains Ahead

1 Adani Group stock engaged in the energy sector, with zero bonus issues, sub-divisions and dividends, is an attractive bet. There is the potential for a nearly 42% upside in this Adani stock. Not just that this stock is large and the third largest of Gautam Adani in terms of market capitalization. Who is it? Not the flagship Adani Enterprises or the ports giant Adani Ports, but instead Adani Green Energy which has skyrocketed by nearly 2,670% in 5 years.

Adani Green Energy has a market cap of Rs 2,85,418.89 crore, making it the third largest Adani Group stock, after Adani Ports and Adani Enterprises.

As of October 4, Adani Port's m-cap was at Rs 3,05,238.43 crore, making it the second-largest stock of the conglomerate. But Gautam Adani's most valued stock is Adani Enterprises which has an m-cap of Rs 3,54,511.85 crore.

Coming to Adani Green Energy, brokerage Emkay Global recommended BUY the stock after the company announced a long-term Power Purchase Agreement (PPA) with Maharashtra State Electricity Distribution Company Limited (MSEDCL) under the Letter of Intent (LOI), for the supply of 5 GW (5000 MW) solar power from the world's largest renewable energy park being developed at Khavda in Kutch District of Gujarat, to Maharashtra state, as per the LOI awarded to Adani Power Limited as permitted under the tender conditions.

As per the regulatory, the 6600 MW capacity has been secured through a competitive bidding process initiated by MSEDCL for procurement of a combined 1600 MW thermal and 5000 MW solar power. The terms of the tender permit APL to bid for thermal power capacity along with solar power capacity, which can be supplied by a group company. APL accordingly also bid for 5000 MW solar capacity on behalf of AGEL, thereby leveraging the two entities' respective competitive advantages and strengths in the thermal and solar power sectors.

Also, under the scheme, the solar capacity has been allocated at a flat tariff of INR 2.70 per kWh for the supply of power for 25 years. The solar projects are expected to be connected to the state Transmission System and shall be developed in a staggered manner over a period of three years from execution of the PPAs with MSEDCL.

Emkay's note said, "With this award, same goes up to 25.8 GW, which is ~50% of 50 GW planned by the company by FY29-30. We also view the Rs2.7/kWh flat rate for the PPA term of 25 years positively and the same is in sync with ~Rs45mn/MW of solar module cost, which AGEL is guiding as part of project capex. Khavda, with 30 GW, would enjoy significant economies of scale."

Meanwhile, recently, AGEL has made a 50-50 JV agreement with Total involving 1.15 GW of operational and under construction assets - both PPAs and merchant (SPV named ARE64L) - wherein the latter would invest USD444mn. In Emkay's view, "We believe the deal values the assets at more than Rs60mn/MW and hence seems attractive."

On the valuation, Emkay's note said, "AGEL has also redeemed Holdco notes worth USD750mn recently. The company's CFO, Phuntsok Wangyal, has resigned and Saurabh Shah (currently Deputy CFO of Adani Enterprises) has been appointed as the new CFO. We maintain BUY and TP of Rs2,550/sh; however, we slightly raise our FY25E/26E/27E EPS by 4%/2%/1% due to a slight 1% revenue adjustment."

From the current market price, this is a potential of nearly 42% upside. On October 4th, last week, Adani Green share price ended at Rs 1801.85 apiece. YTD, the stock is up nearly 13%. In a year, the stock surged by nearly 88%, despite the shocks of the Hindenburg report. And in the long term, the stock emerged as a multi-bagger with massive gains of 2,669.95% in 5 years. The stock was merely at Rs 65.05 on October 4, 2019.

AGEL currently has an operating renewable portfolio of 11.2 GW, the largest in India, spread across 12 states. The company has set a target of achieving 50 GW by 2030 aligned to India's decarbonization goals.

AGEL is focused on leveraging technology to reduce the Levelized Cost of Energy (LCOE) in pursuit of enabling largescale adoption of affordable clean energy. AGEL's operating portfolio is certified 'water positive for plants of more than 200 MW capacity', 'single-use plastic free' and 'zero waste-to-landfill', a testament to the company's commitment of powering sustainable growth.