Markets India

Elara Securities has initiated coverage on Adani Power with a target price of Rs 220, implying a 17% upside from current levels, as the company plans to expand its capacity from 18.3 GW to 42 GW by FY32.

Adani Power's Expansion Targets 17% Upside as Elara Securities Initiates Coverage

Elara Securities has initiated coverage on Adani Power with an Accumulate rating and a target price of Rs 220, suggesting a 17% upside from current levels. The brokerage highlighted the company’s planned capacity expansion from 18.3 GW to 42 GW by FY32, while cautioning about execution risks, rising debt, and limited valuation headroom. Adani Power currently operates 18.3 GW of capacity, with an additional 24 GW in the pipeline, including 60% brownfield projects and 13.3 GW backed by long-term power purchase agreements (PPAs).

The expansion plans could boost revenue to Rs 82,254 crore by FY29 and EBITDA growth at a 19% compound annual rate, reaching Rs 33,091 crore. Profit after tax is projected to hit Rs 15,678 crore by FY29, with the company valued at 12 times its estimated FY29 EV/EBITDA. However, reliance on coal and long-term PPAs exposes Adani Power to commodity price volatility and execution risks, which could affect profitability.

The expansion positions Adani Power as a key player in India’s thermal power sector, leveraging coal’s role amid renewable energy fluctuations. Competitors may face increased pressure from India’s coal-based capacity expansion. Risks include rising debt from capital expenditure, limited valuation headroom, and volatile coal/merchant power prices. Opportunities lie in revenue visibility from PPAs and brownfield projects, supported by Adani Power’s experience in revitalizing stressed thermal assets.

Investors are directly affected by the target price and upside potential, while Adani Power must navigate execution challenges and debt management. Competitors in the thermal power sector may see intensified competition due to India’s coal expansion plans.

Adani Power’s expansion could drive significant revenue and EBITDA growth, but success hinges on execution and debt management. The key uncertainty is whether the company can meet its capacity targets without facing financial or operational hurdles.

Topics: Adani Power, Energy Sector, Thermal Power, Capacity Expansion, EBITDA Growth, Investment Analysis, India Markets, Power Purchase Agreements

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Source: ET Markets