JM Financial initiates Adani Power, sees upside on rising power demand

Domestic brokerage JM Financial has initiated coverage on Adani Power with a ‘Buy’ rating, projecting a target price of ₹178 per share, implying a 20 per cent upside from current levels. The brokerage highlighted the company’s robust execution track record, operational efficiency, and major growth potential amid rising power demand in India.

 

Analysts noted that thermal power will remain indispensable to India’s growth story. With peak power demand in the country expected to rise from 250GW in FY24 to 386GW by FY32 and surpass 700GW by 2047, reliable base load thermal generation will be crucial alongside variable renewable energy (VRE) sources like solar and wind. India’s coal-fired generation capacity is estimated at 340GW by 2047, necessitating additions of 97GW by 2035 and a further 137GW to replace retiring units.

 

 

Adani Power has positioned itself to capitalise on this opportunity. The company is currently India’s largest private sector thermal power producer, with an installed capacity of 18.1GW, comprising 10.8GW of organic and 7.3GW of inorganic growth. JM Financial expects operational capacity to reach 41.3GW by FY32, supported by secured land, power purchase agreements (PPAs), environmental clearances, and critical equipment pre-orders.  ALSO READ | Analysts pick IRCTC, 1 other railway stock for likely gain of up to 16% 

The brokerage underscored Adani Power’s execution credentials, citing milestones such as the synchronisation of 4,620MW at its Mundra plant within 36 months, a benchmark in the sector. The company’s in-house project management, logistics capabilities, and proactive procurement strategy, including pre-ordering critical power equipment, enhance the probability of meeting its ambitious 41.9GW capacity target by FY32-FY33.

 

On the financial front, JM Financial expects revenue and Ebitda to grow at a CAGR of 15 per cent and 18 per cent, respectively, over FY25-28, driven by ongoing capacity additions. Ebitda per MW is forecast to rise from ₹1.3 crore in FY25 to ₹1.83 crore in FY32. Net debt is projected to increase from a low of 1.6x Ebitda in FY25 to 3x by FY29 due to incremental funding of the ₹2 trillion capex over FY25-32, but it is expected to moderate back to 1.6x by FY31 as new capacities become operational.  ALSO READ | DMart shares hit 11-month low; Analyst cuts target after Q3 update 

Adani Power has historically traded at an average of 10x trailing EV/Ebitda and 4.7x P/B over the last five years. Considering its strong execution track record and superior operational metrics, including a plant load factor (PLF) of 71 per cent and plant availability factor (PAF) of 91 per cent, JM Financial values the stock at 13x FY28 EV/Ebitda, translating to a price-to-book of 3.4x by FY28.

 

JM Financial’s coverage highlights Adani Power as a first-mover in recognising India’s rising thermal power requirements and executing its growth plans efficiently. With a combination of capacity expansion, operational excellence, and strategic foresight, the stock is positioned to benefit from India’s projected surge in power demand over the next decade. 

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