Adani Power shares: 55% upside possible for Adani stock, says Ventura; here's why

Adani Power target price: Ventura Securities in a fresh note said Adani Power Ltd, being India's largest private pure-play thermal power producer, is strategically positioned, with robust capacity expansion plans, to address critical power demand. It noted that power demand in India is surging, driven by rising manufacturing activities and growing adoption of white goods & gadgets in households. With renewable energy (RE) unable to fully meet the rising energy needs, the widening peak demand-supply gap underscores the necessity of augmenting base load thermal power capacity, the domestic brokerage said.

Ventura Securities recommended 'Buy' on Adani Power, with a revised target of Rs 806, hinting at an upside potential of 54.5 per cent.

Adani Power is committed to future growth through continued investments in thermal power capacity, targeting a total capacity of 30.67 GW by FY31. This is expected to increase the company’s share in India’s thermal power sector from 6 per cent in FY24 to 11 per cent by FY31.

"As a result, over FY24-27E, Adani Power's revenue and Ebitda are expected to grow at a CAGR of 11.8 per cent and 11 per cent, to reach Rs 70,284 crore and Rs 24,864 crore, respectively, while net profit is projected to drop from Rs 20,829 crore in FY24 to Rs13,121 crore in FY27E, due to one-time discom claims of Rs 8,657 crore and a net tax credit of Rs 37 crore received in FY24," Ventura Securities said.

The brokerage said Ebitda margins may decline 73 basis points (bps) to 35.4 per cent due to the initial overhead costs related to new capacities. As a result, RoE and RoIC are expected to decline by 3207 basis points to 16.2 per cent (due to decline in net profit) and 348 bps to 16.9 per cent, respectively, by FY27, the brokerage said.

"The company’s working capital-to-sales ratio of under 30 per cent reduces short-term funding needs, while a manageable net debt of Rs 30,985 crore," it said.

In FY24, Adani Power achieved YoY growth in revenue and Ebitda of 29.9 per cent to Rs 50,351 crore and 81 per cent to Rs 18,181 crore, respectively. In H1FY25, revenue and Ebitda recorded a strong YoY growth rate of 17.9 per cent and 32.1 per cent, respectively.