'Thermal power is still king': Adani Power share price target at Rs 595, says Cantor

Adani Power Ltd share is in focus on Monday, March 17, as Cantor Fitzgerald has initiated coverage on the stock with an 'overweight' rating, saying thermal power is still king and that India will continue to meaningfully rely on thermal power as the economy grows and matures.

Adani Power is an owner and operator of 11 thermal power plants and one solar power plant in India. With effective capacity of 17.5 GW, it is the largest privately-owned thermal power generator in India. Adani Power has more thermal power capacity than the likes of Tata Power and Reliance Power, and only trails state-owned NTPC.

The Adani Power stock valuations are quite reasonable, said the US-based Cantor Fitzgerald as it suggested a target price of Rs 595 on the stock, citing favourable risk-reward.

"We believe risk-reward for APL is attractive at current levels. On our FY26 continuing Ebitda estimates, APL is currently trading at 10.9 times. This compares to US peers trading at 11.6 times, Europe peers trading at 7.2 times, and India peers trading at 11.9 times," it said.

Cantor Fitzgerald said Adani Power has one of the better balance sheets across the industry and a growth profile that it believed is unmatched. It expects the Adani Power stock should at least trade at an in-line multiple to its peer group in India, if not a premium. Its target price is based on a 12.5 times EV/Ebitda multiple, implying a small premium.

"We believe Adani Power has significant balance sheet flexibility to fund additional capacity expansion, both organically and inorganically. On the inorganic front, we would note APL has on multiple occasions acquired underperforming thermal power plants, and
we expect it will continue to be aggressive given the balance sheet flexibility it has," Cantor Fitzgerald said.

What makes Adani Power interesting, the brokerage said, is the combination of growth -- Adani Power is expected to add 12.5 GW of capacity over next five years -- balance sheet flexibility (lowest leverage it has had in several years), and the view that India will continue to meaningfully rely on thermal power as the economy grows and matures.