Investec bets on Adani Green, initiates with 'Buy'; sees 31% upside

Investec on Adani Green: International financial services company Investec has initiated coverage on Adani Green Energy (AGEL) with a ‘Buy’ rating and set a target price of Rs 2,515, indicating a potential upside of approximately 31 per cent from the current market price. 

“We value AGEL at 15x FY30E consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda), adjusting for the FY29E net debt and PV of minority interest (discounted at 12 per cent) to arrive at a target price of Rs 2,515. Initiate at Buy,” said Anuj Upadhyay, research analysts at Investec.

Despite this positive outlook, Adani Green’s stock was trading about 2 per cent lower at Rs 1,890.20 as of 9:26 AM, while the BSE Sensex was down 0.08 per cent to 82,920.90 levels.

 

Key drivers behind the ‘Buy’ rating:

Capacity expansion plans

According to analysts, AGEL aims to scale its renewable energy capacity to over 50 GW by FY30. This includes plans to develop 30 GW in Khavda and 11 GW in Rajasthan. 

“In-place evacuation infrastructure coupled with inhouse manufacturing ecosystem at group companies’ places AGEL in a sweet spot to achieve its FY30 target,”  Upadhyay said.
 

Effective capital management 

AGEL’s strategic approach to debt and equity financing, combined with strong operating cash flow management, analysts believe, is designed to minimise equity dilution and maintain a favourable net debt-to-equity ratio.

Despite a major increase in net debt, AGEL’s net debt-to-equity ratio is projected to improve from 3.1x in FY24 to 2.1x by FY30, analysts opined.

Enhanced operational metrics

The company is leveraging advanced technology to boost its Capacity Utilisation Factor (CUF) and increase its merchant power sales. This, analysts at Investec said, is expected to drive a 60 per cent compound annual growth rate (CAGR) in profit after tax (PAT) from FY24 to FY30.

Q1FY25 highlights

The company’s first-quarter (Q1FY25) profit almost doubled from a year ago on the back of strong energy sales and enhanced operational capacity.

Adani Green’s consolidated profit rose to Rs 629 crore in Q1FY25, from Rs 323 crore a year earlier (Q1FY24). The sales increased 22 per cent year-on-year (Y-o-Y) to 7,356 million units (MUs) in the quarter. 

Its operational capacity stood at 11.2 gigawatts (GW), of which solar energy alone accounts for almost two-thirds.

Adani Green Energy Limited is among the leading renewable energy companies in India that develops, owns, and operates solar, wind, and hybrid power plants. 

The market capitalisation of Adani Green is Rs 2,99,508.86 crore, according to the Bombay Stock Exchange (BSE). The company falls under the BSE200 category.