Adani Power share price target as subdued demand weighs on Q3 results

Antique Stock Broking on Friday maintained its 'Buy' rating on Adani Power Ltd and retained a target price of Rs 187, despite subdued December quarter results, citing long-term capacity expansion, improving power purchase agreement (PPA) coverage that enhances earnings visibility, and balance sheet resilience amid near-term earnings pressure.

The domestic brokerage said Adani Power navigated a challenging operating environment in the third quarter amid softer power demand and weaker merchant tariffs. Consolidated sales declined 8.9 year-on-year (YoY) to Rs 12,451.44 crore, while power sales rose marginally by 1.3 per cent to 23.6 billion units (1 billion equals 100 crore), supported by higher installed capacity of 18.15 GW following the Vidarbha acquisition.

Plant load factor eased to 63 per cent from 64 per cent a year earlier, Antique Stock Broking noted. Merchant volumes fell 6.5 per cent to 4.3 billion units, while average merchant realisation declined to Rs 4.37 per unit from Rs 4.56. As a result, Ebitda contracted 15.6 per cent year-on-year to Rs 4,240 crore, with margins narrowed to 34.0 per cent from 36.7 per cent. Antique said lower merchant prices and import coal-linked charges weighed on profitability, partly offset by around 10 per cent lower fuel costs.

Adani Power's net profit declined 19 per cent YoY to Rs 2,479.58 crore, broadly in line with Antique’s estimate but about 8 per cent below Street expectations, largely due to lower prior-period income. The brokerage noted that the merchant contribution reduced to 18 per cent from 20 per cent a year ago amid sharply lower day-ahead prices, leading to an Ebitda miss of 14 per cent versus its estimate and 23 per cent versus consensus.

Following the quarter, Antique said it had cut its FY26 earnings estimates to factor in cyclical softness in merchant demand, while retaining its FY27 and FY28 forecasts. “We continued to see support from Adani Power’s expanding PPA portfolio and de-risked growth pipeline,” the brokerage said.

On the balance sheet, Antique highlighted that net debt stood at Rs 3,870 crore. The company also strengthened liquidity by raising Rs 7,500 crore through AA-rated non-convertible debentures to fund capex and working capital requirements.

Antique said execution momentum remained strong, with 23.7 GW of capacity under construction across brownfield and greenfield projects, which would take total capacity to 41.9 GW by FY33. It said brownfield-led expansion would allow capex of around Rs 8 crore per MW with execution timelines of about three and a half years, while phased commissioning was expected to begin from FY27 onwards.

The brokerage also said Adani Power reinforced its position in thermal bidding, having secured 12.3 GW of capacity out of 19.3 GW awarded so far. Antique said merchant exposure was expected to decline to 3 to 4 per cent over the next six to seven years as new capacities were tied up under PPAs.

Reiterating its stance, Antique maintained its Buy call with a target price of Rs 187, based on 15 times FY28 estimated Ebitda, supported by a discounted cash flow valuation. The brokerage said the investment case rested on scale-led growth, improving cash flow visibility and a gradual reduction in earnings volatility.