This Adani stock gets 53% upside target post Q3 results; do you own it?

Ventura Securities has retained its 'Buy' rating on Adani Energy Solutions Ltd (AESL) with a target price of Rs 1,298, implying an upside of 53 per cent over its Wednesday's trading price of Rs 846.65 apiece. The domestic brokerage said the stock was trading at 12.2 times FY28 EV to Ebitda and valued the company at 16.2 times FY28 EV to Ebitda based on its discounted cash flow assessment.

Ventura Securities said its positive view is underpinned by improving profitability, strong execution in the transmission business and rapid scaling up of the smart metering segment, which s increasingly driving margin expansion and cash flows.

Over FY25 to FY28, Ventura Securities expects AESL’s revenue, Ebitda and net profit to grow at a compound annual growth rate of 25.9 per cent, 26.1 per cent and 58.1 per cent, respectively. It projected revenue of Rs 47,471 crore, Ebitda of Rs 14,184 crore and net profit of Rs 4,189 crore by FY28.

Ebitda margins are expected to expand by 15 basis points to 29.9 per cent, while net margins were seen improving by 436 basis points to 8.8 per cent. The brokerage said improving cash flows are expected to reduce net debt to equity to 2.3 times and net debt to Ebitda to 5.2 times, while return on equity and return on invested capital are projected to improve to 12.9 per cent and 10.2 per cent, respectively.

For the December quarter, AESL reported revenue growth of 15.4 per cent year-on-year (YoY) to Rs 6,730 crore in Q3FY26, while Ebitda rose 20.2 per cent YoY to Rs 1,995 crore. Ebitda margins expanded to 29.7 per cent from 28.5 per cent a year earlier, Ventura said.

Net profit declined 1.6 per cent YoY to Rs 552 crore, which Ventura Securities attributed to a one-time deferred tax gain of Rs 88.5 crore in Q3FY25 and a higher effective tax rate of 28.2 per cent in the reported quarter.

The brokerage said growth during the quarter was driven by incremental contributions from newly commissioned transmission assets, higher power demand at Mundra Utility Ltd and healthy cash inflows from the smart meter business.

Ventura Securities highlighted the smart metering business as a key profitability driver. Operational revenue from the segment surged 1,283 per cent YoY to Rs 235 crore, supported by daily deployments of more than 20,000 meters. AESL installed 18.9 lakh meters during Q3FY26, taking cumulative installations to 92.5 lakh meters, and remained on track to exceed its guidance of 1 crore cumulative meters by the end of FY26.

Ebitda from the smart meter segment jumped 1,320 per cent YoY to Rs 213 crore, with margins improving to 90.6 per cent from 78.6 per cent a year earlier.

In the power transmission segment, operational revenue rose 4.2 per cent YoY to Rs 1,239 crore, while Ebitda increased 4.4 per cent YoY to Rs 1,134 crore. Margins expanded by 19 basis points to 91.5 per cent. Ventura Securities noted that several projects were commissioned towards the end of Q3FY26, limiting their full revenue contribution during the quarter, with some timelines spilling into Q4FY26.

Operational revenue from the power distribution segment rose 4.4 per cent YoY to Rs 3,104 crore. Power sales volumes increased 1.7 per cent YoY, while per-unit realisation improved 6.2 per cent YoY.

Mundra Utility Ltd’s power consumption expanded 57.2 per cent YoY due to higher industrial demand in the Mundra SEZ area. In contrast, Adani Electricity Mumbai Ltd’s power consumption declined 3.4 per cent YoY due to seasonal weather conditions and an extended monsoon. Segment Ebitda rose 4.5 per cent YoY to Rs 506 crore, though margins declined 64 basis points to 19.5 per cent.