Emkay initiates coverage on Adani Green, predicts strong returns from RE

Emkay Global has initiated coverage on Adani Green Energy (AGEL) with a BUY rating, stating that the improving capacity utilisation factor (CUF) would drive a power sales compound annual growth rate (CAGR) of 35 per cent.

The brokerage expects AGEL to deliver an operational renewable energy (RE) capacity CAGR of over 30 per cent during FY24-30E, driven by its development strategy focused on the Khavda asset in Gujarat.

An increasing share of merchant, and commercial and industrial (C&I) volumes is expected to reach 20 per cent by FY30, stated the report. AGEL aims to expand its RE capacity to 56.5 gigawatts (GW) by FY30, enhancing its market share from 8 per cent to 15 per cent and increasing merchant capacity from 5-6 per cent to 20 per cent, the analysts noted.

Risks that could impact AGEL's growth trajectory, according to Emkay, include execution risks related to generation and transmission projects, potential delays, and cost overruns. Regulatory and policy risks, inflationary pressures on equipment costs, and resource-related uncertainties, such as solar irradiance and wind speed, also pose challenges, the report added.

The competitive landscape for power purchase agreements (PPAs) could further complicate AGEL's profitability, as lower tariffs may make projects less economically viable, stated the report.

AGEL has achieved a 41 per cent CAGR in operational RE capacity over the past five years. The company has secured over 50 GW of sites for solar and wind development in Gujarat and Rajasthan, with an additional 5 GW for pumped storage (PSP). The focus will now be on the high-yield Gujarat-Rajasthan supersites, which have exceptional solar irradiance and wind speeds, the report said.