Is Adani Power on the Path to a Major Turnaround as Per Morgan Stanley?

Mumbai, Sep 19 (NationPress) The shares of Adani Power Ltd (APL) experienced a significant rise during morning trading on Friday, following global brokerage Morgan Stanley's initiation of an 'Overweight' rating for the company, with a target price set at Rs 818, indicating a potential increase of 29 percent from its last closing price.

The brokerage noted in a report that Adani Power exemplifies a remarkable turnaround in India's corporate landscape, having successfully resolved most regulatory challenges and engaged in several value-enhancing acquisitions.

“APL is poised for robust earnings growth driven by the timely finalization of projects and additional PPA wins in the medium term. We are initiating our coverage with an 'Overweight' rating and identifying it as a top pick,” stated the brokerage.

Moreover, new coal power purchase agreements (PPAs) are expected to bolster investor trust in the company's earnings potential, according to Morgan Stanley.

The firm also anticipates that APL's capacity and earnings before interest, taxes, depreciation, and amortization (EBITDA) will increase by 2.5 times and 3 times respectively by the financial year 2033.

“We assert that coal remains pivotal to India's energy security, with nuclear power anticipated to be a key player in the coming decade. India aims to add 80GW of coal by FY32, backed by a significant PPA pipeline of 20GW,” the report revealed.

During morning trading, the stock was observed to be up by approximately 7-8 percent. Adani Power shares concluded the previous session with a 0.5 percent increase.

As India's largest independent power producer and the second-largest overall (following NTPC), Adani Ports commands an 8 percent share in both coal and power generation.

“We predict its market share will grow to 15 percent by FY32 with a portfolio of 41.9GW (2.5 times compared to FY25). APL has successfully navigated most regulatory issues and boasts a strong balance sheet (FY25 net debt/EBITDA: 1.5 times). We expect that 60-65 percent of its US$27 billion capital expenditure for a 23.7GW increase will be covered through internal revenues,” the brokerage added.

Timely project completions (land acquisition, boiler-turbine-generator orders, construction execution by the Adani Group, and reduced external debt) combined with signed PPAs are expected to enhance earnings.

“We foresee an upside to our forecasts if APL’s merchant portfolio decreases from the current 20 percent, and profitability in the newly acquired 2.9GW power plants improves,” concluded the brokerage's note.