Whalesbook
JM Financial has initiated coverage on Adani Power with a 'Buy' rating and set a target price of ₹178 per share, suggesting a 20% potential upside. The brokerage firm pointed to the company’s strong execution history and operational efficiency, highlighting significant growth prospects as India’s power demand continues to climb.
Power Demand Surge
Analysts emphasize that thermal power remains essential for India's economic expansion. Peak power demand, projected to rise from 250GW in FY24 to 386GW by FY32, is expected to surpass 700GW by 2047. This necessitates reliable baseload thermal generation to complement variable renewable sources like solar and wind. India's coal-fired capacity requires substantial additions, with estimates suggesting an increase of 97GW by 2035 and a further 137GW to replace retiring units.
Adani Power's Expansion Strategy
Adani Power is strategically positioned to capture this market opportunity. Currently India's largest private sector thermal power producer with 18.1GW installed capacity, the company plans to reach 41.3GW by FY32. This expansion is supported by secured land, power purchase agreements (PPAs), environmental clearances, and pre-orders for critical equipment.
Execution Excellence
The brokerage firm underscored Adani Power's proven execution capabilities, citing the rapid synchronisation of 4,620MW at its Mundra plant within 36 months. This benchmark achievement is attributed to the company’s in-house project management, robust logistics, and proactive procurement strategies. These factors enhance the likelihood of meeting ambitious capacity targets.
Financial Outlook
JM Financial forecasts Adani Power's revenue and Ebitda to grow at a compound annual growth rate (CAGR) of 15% and 18%, respectively, between FY25 and FY28. This growth is anticipated to be driven by ongoing capacity additions. Ebitda per megawatt is expected to increase from ₹1.3 crore in FY25 to ₹1.83 crore by FY32. Net debt is projected to rise temporarily due to a substantial ₹2 trillion capex plan over FY25-32, peaking at 3x Ebitda by FY29 before moderating back to 1.6x by FY31.
Valuation Metrics
Historically, Adani Power has traded at an average of 10x trailing EV/Ebitda and 4.7x P/B over the past five years. Considering its strong execution and operational metrics, including a Plant Load Factor (PLF) of 71% and Plant Availability Factor (PAF) of 91%, JM Financial values the stock at 13x FY28 EV/Ebitda. This translates to a Price-to-Book (P/B) ratio of 3.4x by FY28.
JM Financial highlights Adani Power’s first-mover advantage in addressing India's growing thermal power needs. The company's capacity expansion, operational efficiency, and strategic planning position it to benefit significantly from India's projected surge in power demand over the coming decade.