Investec has initiated coverage on India’s largest renewable energy company, Adani Green Energy, with a 'Buy' rating and a target price that suggests 30 per cent upside potential.
The foreign brokerage said Adani Green Energy is poised to clock 5 times growth in its installed capacity to 50GW-plus by FY30, replicating its historical growth rate of 5 times to 11GW over FY19-24. The growth would be led by 30GW/ 11GW installation in Rajasthan and Gujarat's Khavda, where Adani Green Energy has access to large resource rich land bank along with evacuation facilities, Investec said.
"Also, usage of new age technology and higher share of merchant/C&I power will drive revenue/ Ebitda /PAT at a CAGR of 34 per cent/37 per cent/60 per cent over FY24-30 period. Strategic capital management, equity infusion by promoters/JV partners and healthy OCF negates the risk of equity dilution while maintaining comfortable D/E," it said.
Investec values Adani Green Energy at 15 times FY30 consolidated Ebitda, adjusting for the FY29 net debt, to arrive at a target price of Rs 2,515. On Monday, Emkay Global maintained its 'Buy' rating on the stock and suggested a price target of Rs 2,550 per share.
Adani Green Energy's capital management through strategic debt arrangements, equity infusions from promoters/JV partners and prudent handling of operating cash flow is efficient, Investec said adding that the Adani firm's approach effectively mitigates the risk of equity dilution and would ensure a comfortable net debt-to-equity ratio of 2.1 times in FY30 against 3.1 times in FY24.
This is even as it sees a likely 3.4 times rise in net debt to Rs 1.87 lakh crore over FY24-FY30.
"Adoption of new age technology in resource rich sites like Khavda and Rajasthan will ensure higher CUF across stations (solar – 30 per cent, wind - 33 per cent & hybrids – 43 per cent). This coupled with higher share of merchant (15 per cent - FY30 vs 5 per cent - FY24) will drive 60 per cent CAGR of PAT over FY24-30E," it said.
On Tuesday, the stock was trading 1.64 per cent higher at Rs 1,898.35 on BSE.