Antique initiates coverage on Adani Power with Buy, sees earnings upcycle

Antique Stock Broking has a target price of ₹187 per share for Adani Power, an upside of 30 per cent from Monday's close.

Antique Stock Broking initiated coverage on Adani Power Ltd. with a 'Buy' rating, citing strong earnings visibility and a multi-year upcycle led by aggressive capacity expansion.

 

Antique expects Adani Power's capacity to expand 2.3x from 18.15 Gigawatt (Gw) in the financial year 2025 (FY25) to 41.9 Gw by FY33, transforming the company from a stressed thermal independent power producer into one of India's most efficient private baseload power generators. 

 

The brokerage highlighted a favourable demand backdrop, with electricity demand projected to grow at a 6 per cent compound annual growth rate (CAGR) over FY2022-32, supported by electric vehicles, data centres, artificial intelligence workloads and manufacturing activity.

 

The brokerage noted that Adani Power has emerged as the clear leader in the ongoing state-led thermal power procurement cycle, securing around 70 per cent of awarded capacity, or 12.4 Gw out of 17.7 Gw, reflecting its cost competitiveness and execution strength.   ALSO READ | Axis Capital starts coverage on ONGC with 'Sell'; sees 14% downside 

Earnings visibility remains robust, with around 90 per cent of operational capacity and 67 per cent of the overall 41.9 Gw portfolio tied up under long-term power purchase agreements, the brokerage said. New contracts also offer higher fixed charges, while Shakti-linked fuel supply agreements support fuel security, it added.

 

Antique estimates consolidated revenue, Ebitda and profit after tax to grow at 16 per cent, 19 per cent and 17 per cent compound annual growth rates, respectively, over FY25-32. The brokerage expects APL to fund nearly 60 per cent of its ₹2 trillion capital expenditure pipeline through internal accruals, enabling steady deleveraging, with net debt to Ebitda declining to below 1x by FY32 (estimated) and return on equity sustaining above 15 per cent.

 

The report highlighted that around 60 per cent of the expansion pipeline is brownfield, which compresses capital costs to about ₹80 million per Mw and reduces execution timelines to roughly 3.5 years, compared with five to six years for typical public-sector projects.   ALSO READ | ICICI Securities initiates coverage on Netweb with 'Buy'; sees 28% upside 

This growth strategy is aligned with India’s rising peak power demand, which is projected to reach 388 Gw, while increasing captive coal output of 14 million tonnes per annum is expected to support merchant capacity and improve dispatch competitiveness, it said.

 

Antique valued the stock at 15x FY28 Ebitda, supported by a discounted cash flow valuation, and said APL's long-term earnings visibility, expanding margins and dominant power purchase agreement position justify premium valuation multiples. It has a target price of ₹187 per share, an upside of 30 per cent from Monday's close.   ----- 

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