Adani Power rated 'Overweight' by Morgan Stanley; 65% upside in bull case

Morgan Stanley assigned a target of ₹818 per share under the base case, an upside of nearly 30 per cent from Thursday's close

Morgan Stanley initiated coverage on Adani Power stock with an overweight rating, citing its improving market share and favourable regulatory resolutions. 

 

The global brokerage assigned a target price of ₹818 per share under the base case, an upside of nearly 30 per cent from Thursday's close. The shares are up over 7 per cent on Friday after the market regulator dismissed all allegations of stock manipulation and accounting irregularities raised by Hindenburg Research.

 

Morgan Stanley noted that Adani Power holds an 8 per cent share in both coal capacity and generation, which it expects to rise to 15 per cent by fiscal 2032 with a 41.9 gigawatt (Gw) portfolio, 2.5 times its fiscal 2025 level.

 

The brokerage noted that the power producer has resolved most regulatory issues. It maintains a strong balance sheet with a projected net debt-to-Ebitda ratio of 1.5x in fiscal 2025, and plans a $27 billion capex for 23.7 Gw of additions, of which 60-65 per cent will be funded through internal accruals, Morgan Stanley added.   READ STOCK MARKET UPDATES LIVE 

It said that timely project execution, power purchase agreements, and improved profitability in the recently acquired 2.9 Gw plants could further boost earnings, while a decline in the merchant portfolio from the current 20 per cent would provide additional upside.

 

In its bull case scenario, Morgan Stanley set a target price of ₹1,041 (65 per cent upside), assuming the company ties up its entire under-construction and operational merchant capacity.

 

The brokerage model factors in a 70 per cent plant load factor for power purchase agreement (PPA) capacity, with Ebitda per unit of ₹2.1 for existing capacity and ₹3.5 for new PPA capacity. This translates into a 20 per cent Ebitda compound annual growth rate (CAGR) over fiscal 2025-28, or 18 per cent CAGR over fiscal 2025-33.

 

Morgan Stanley said coal remains central to India’s energy security, while nuclear power is expected to be a key driver over the next decade. The brokerage noted that India plans to add 80 Gw of coal capacity by fiscal 2032, supported by a PPA pipeline of over 20 GW.

Adani group stocks gain post Sebi order

The Securities and Exchange Board of India, on Thursday, cleared the Adani Group of allegations made by the US-based short-seller Hindenburg Research, and disposed of the instant proceedings against group companies Adani Ports, Adani Power, and its chairman Gautam Adani.

 

On Friday morning in trade, Adani Group's flagship company's stock, Adani Enterprises, surged 5 per cent. Adani Ports and Adani Power, which received Sebi clean chit, gained 3 per cent and 8 per cent, respectively. 

Adani Power share price history

Shares of the company rose for the second straight day and currently trade at 6.9 times the average 30-day trading volume, according to Bloomberg. The counter has risen 27 per cent this year, compared to a 7.5 per cent advance in the benchmark Nifty 50. Adani Power has a total market capitalisation of ₹2.6 trillion.