Adani Power shares up 40% in 12 months; is more upside ahead?

Adani Power Ltd, an Adani group stock, has received 'Buy' rating from JM Financial with a target price of Rs 178 per share. The domestic brokerage initiated coverage on the stock, valuing the stock at 13 times FY28 EV to Ebitda. Adani Power shares, which are up 40 per cent in the past one year, settled 1.32 per cent lower at Rs 146.20 apiece on Monday.

JM Financial said its valuation for the stock reflected improving Ebitda per megawatt and the company’s strong execution track record.

JM Financial said Adani Power has emerged as India’s largest private sector thermal power producer with 18.1 GW of installed capacity, comprising 10.8 GW of organic capacity and 7.3 GW added through acquisitions.

The brokerage said the company is targeting 41.9 GW of capacity by FY32, underpinned by secured land, environmental clearances, power purchase agreements and advance ordering of critical equipment. It said Adani Power has created execution benchmarks, including the synchronisation of 4,620 MW at Mundra within 36 months, supported by in-house project management and logistics.

JM Financial said it expected operational capacity to reach 41.3 GW by FY32, while Ebitda per MW was projected to rise from Rs 1.3 crore in FY25 to about Rs 1.8 crore by FY32, aided by superior operating metrics such as plant load factor of 71 per cent and plant availability factor of 91 per cent.

JM Financial said net debt to Ebitda is likely to increase from 1.6 times in FY25 to about 3.0 times by FY29, as the company raised incremental debt to fund a capex programme of around Rs 2,00,000 crore over FY25 to FY32. However, leverage is expected to moderate back to around 1.6 times by FY31 as new capacities became operational and cash flows improved.

On the sector outlook, JM Financial said thermal power remained indispensable to India’s growth and grid stability. It said peak power demand was expected to rise from about 250 GW in FY24 to 386 GW by FY32 and further to over 700 GW by FY47. The brokerage said rising penetration of variable renewable energy would continue to challenge grid reliability, necessitating dependable base-load thermal generation alongside long-duration energy storage. It estimated that India would require around 340 GW of coal-fired capacity by 2047, implying additions of about 97 GW by 2035 and a further net addition of 137 GW by 2047 to offset retirements.

JM Financial said Adani Power was among the first to recognise the post-Covid surge in peak demand, which grew 6.7 per cent in FY22, 6.3 per cent in FY23 and 12.7 per cent in FY24, and to respond with accelerated capacity build-up. Given its execution capabilities and readiness of key enablers, the brokerage said there was a high probability of achieving the 41.9 GW target around FY32 to FY33.

From a financial perspective, JM Financial said it expected revenue and Ebitda compound annual growth of about 15 per cent and 18 per cent, respectively, over FY25 to FY28, compared with 21 per cent and 25 per cent over FY20 to FY25. It noted that the stock had traded at an average of 10 times trailing EV to Ebitda and 4.7 times price to book over the past five years, and said the premium valuation was justified by execution strength and improving operating metrics.