Morgan Stanley sees 20% upside in Adani Ent; rates 'Overweight'; here's why

Morgan Stanley initiated coverage on Adani Enterprises with an 'Overweight' rating. It has assigned a target price of ₹3,638 on the stock.

Adani Enterprises share price target: Shares of Adani Enterprises gained 2.5 per cent in intraday trade today after global brokerage Morgan Stanley initiated coverage on the stock with an 'Overweight' rating. The stock opened higher at ₹2,988.30 and climbed to an intraday high of ₹3,037.

 

Morgan Stanley has assigned a target price of ₹3,638 on the stock. The target implies an upside of nearly 20 per cent from the day's high.

 

As of 12:30 PM, Adani Enterprises shares were trading at ₹3,032, with a market capitalisation of ₹3.94 trillion.

 

Morgan Stanley has described Adani Enterprises as India's "premier incubator", with exposure to multi-decade themes including transport infrastructure, data centres, energy transition, and self-reliance (copper, PVC, mining and defence).  READ LATEST STOCK MARKET UPDATES TODAY LIVE

 

FY27 marks an earnings inflection point

The brokerage believes FY27 marks a major earnings inflection point for the company as several businesses start contributing meaningfully to profits. 

"AEL is now entering a large earnings monetisation phase, with multiple businesses reaching scale simultaneously," the brokerage said, while noting that the company's earnings quality is improving as the mix shifts from commodity-linked earnings toward regulated and contracted infrastructure (airports, roads), digital infrastructure (data centres), and manufacturing platforms.

Key growth drivers

According to Morgan Stanley, four major growth drivers are expected to boost the company's earnings from FY27 onwards. They are:

 

i) Navi Mumbai International Airport (NMIA) commissioning

 

ii) Capacity expansion and backward integration in its new energy business

 

iii) Tolling has commenced at the Ganga Expressway project

 

iv) Increased copper smelting utilisation

 

EBITDA may triple by FY30

 

The brokerage expects Adani Enterprises' revenue and EBITDA to grow at a CAGR of 19 per cent and 32 per cent, respectively, over FY26-30E.

 

It estimates EBITDA will increase by three times, from ₹140 billion in FY26 to ₹423 billion by FY30, driven by airports, new energy, and primary industries. Its data centre JV, AdaniConneX, is expected to see a sharp ramp-up, contributing to earnings.  READ | JM Financial retains Buy on Tata Motors, sees 14% upside; stock up 4%

Airports business

 

Its airports business is projected to deliver a 29 per cent Ebitda CAGR, growing from ₹51.6 billion in F26 to ₹141 billion in F30. Adani Airport Holdings Limited (AAHL) operates India’s largest private airport network. Its eight airports handled 95.5 million passengers in F26, representing 23 per cent of India’s total passenger traffic and 29 per cent of air cargo. The business, the brokerage said, "is entering a structural earnings inflection, driven by NMIA commissioning and ramp-up, tariff resets across key airports, and accelerating non-aero monetisation."

 

New energy business

 

The new energy business is expected to grow at an 18 per cent CAGR through FY30, the brokerage said. It noted that Adani Enterprises is at the forefront of India's energy transition, spanning solar manufacturing, wind turbine assembly, green hydrogen, and new energy ecosystems through ANIL, making it one of the few platforms globally with exposure across the entire clean energy value chain. 

 

Data centre business

 

The primary industries are projected to report a 45 per cent CAGR through FY30, while the data centre JV could deliver Ebitda growth of around 160 per cent CAGR. 

 

On the company's data centre business, Morgan Stanley said that AdaniConneX (ACX) (a 50:50 JV between AEL and EdgeConneX since 2021) is aiming to build India’s largest hyperscale data center platform, with a 2GW portfolio by 2030 versus 55MW currently. ACX charges tariffs in dollars, largely to hyperscaler customers that source their own GPUs.

 

"The Adani Group has a strong "right to win" in India's DC market, given its experience in procuring land, obtaining regulatory approvals, manufacturing solar modules and wind turbines, executing large transmission projects, and sourcing firm and reliable power, including green power with storage through PSP/BESS and thermal power," Morgan Staley said. 

 

Key risks 

 

Despite its positive outlook, Morgan Stanley highlighted several risks for the company, including execution challenges associated with multiple large-scale capex programmes, regulatory risks in the airport business, leverage and refinancing risks during the investment phase, and earnings volatility in businesses such as copper, PVC and IRM.  ======================================== 

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