Adani Energy's Promising Trajectory Remains Strong: Jefferies
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Synopsis
Jefferies maintains its 'buy' rating on Adani Energy Solutions, projecting a 67% upside to Rs 1,300. The company reports robust growth in both transmission and distribution sectors, with a strong project pipeline.
Key Takeaways
- Jefferies maintains a 'buy' rating.
- Target price set at Rs 1,300, indicating 67% upside.
- Company reported 99.7% system availability.
- Strong project pipeline of Rs 547 billion.
- 24% market share in competitive bids.
New Delhi, Jan 17 (NationPress) Global brokerage Jefferies has upheld its 'buy' recommendation for the shares of Adani Energy Solutions, asserting that the company’s growth narrative is solid.
The brokerage has set a target price of Rs 1,300 for the stock, indicating a potential 67 per cent increase.
“This represents a 50 per cent premium compared to our estimated 10 times target EV/EBITDA multiple for Power Grid, considering the significantly higher growth projected for Adani Energy, in contrast to Power Grid’s 6-7 per cent profit after tax compounded annual growth rate for FY24-27,” the report stated.
In its Q3 update, Adani Energy Solutions reported an impressive system availability rate of 99.7 per cent.
“The company has expanded its transmission network by 225 circuit kilometres (ckm), raising the total to 26,485 ckm. The addition of two new projects has increased the project pipeline to Rs 547 billion, up from Rs 170 billion at the beginning of FY25. Smart metering is emerging as a high-growth sector. The capital management program aims to minimize fluctuations in interest expenses through long-term bonds. We recommend buying,” Jefferies noted.
Adani Group succeeded in winning two transmission bids in Q3, both situated in Rajasthan, related to the renewable energy facility.
The company now holds a 24 per cent market share in competitive bids, up from 17 per cent following the recent victories.
“Management has indicated a strong pipeline for near-term tenders at Rs 590 billion, a 55 per cent year-on-year increase based on its recent Q2 discussion. We expect AESL to achieve a 16 per cent revenue CAGR and 62 per cent PAT CAGR for FY24-27E, fueled by secured growth in both the transmission and distribution sectors,” the brokerage elaborated.
Recently, Tamil Nadu canceled an 8.2 million meter bid, stating that while Adani Energy Solutions was the lowest bidder, they considered the bid price to be relatively high.
“This decision does not affect AESL’s ongoing projects since they are not part of the 22.8 million metrics,” the brokerage clarified. “We believe the company is unlocking its potential in both smart metering and distribution.”
