Accumulate Adani Energy Solutions Ltd for Target Rs. 1,013 by Elara Capital
All-round performance boosts earnings
Adani Energy Solutions (ADANIENS IN) reported a strong Q4FY25, with 35% YoY revenue growth to INR 64bn, driven by capacity and RAB expansion and a ramp-up in smart metering. EBITDA grew 44% YoY to INR 23bn, with margin improving to 35%. Adjusted PAT rose 48% YoY to INR 5.66bn. The orderbook stood strong at INR 599.4bn. ADANIENS led the market with a 28% share in a year that posted a record INR 1.6tn transmission bidding. Smart meter installations reached 3.13mn, with a target of 10mn by FY26 and a pipeline of 22.8mn meters. So, given a robust Q4, we raise our TP to INR 1,013 (from INR 930). But we revise ADANIENS to Accumulate from BUY as the stock has appreciated recently.
Capacity expansion, RAB expansion and ramp up in smart metering drive earnings: ADANIENS reported a revenue growth of 35% YoY to INR 64bn in Q4. Revenue from the transmission segment increased 18% YoY to INR 22bn and from distribution rose 21% YoY to INR 29bn in Q4FY25. EBITDA rose 44% YoY to INR 23bn with operating margin expanding to 35% from 33% in Q4FY24. PAT increased 87% YoY to INR 7.14bn. Adjusted PAT increased 48% YoY to INR 5.66bn after adjusting for one-time tax items of INR 4.69bn and regulatory income of INR 1.48bn.
Strong transmission orderbook at INR 599.4bn: ADANIENS has won seven transmission projects with a cumulative project cost of INR 439.9bn in FY25, taking its total orderbook to INR 599.4bn. It has secured two new transmission projects – Navinal (Mundra) Phase I Part B1 and Mahan Transmission in Q4FY25. In FY25, transmission bidding activity touched an unprecedented level of INR 1,615.40bn, with ADANIENS’ market share at 28%. The near-term tendering pipeline is solid at ~INR 540.00bn.
Smart meter deployment is progressing well: The smart meter deployment is progressing well with total installations reaching 3.13mn. ADANIENS plans to install at least 6-7mn new meters in FY26, thereby cumulatively achieving a minimum ~10mn meters by the end of FY26. The under-implementation pipeline stands at 22.8mn smart meters, comprising nine projects with a revenue potential of >INR 271.95bn. On the back of strong power demand trend, energy demand in the Mumbai circle (AEML) ended 6% higher YoY at 10,558MUs and increased by 44% YoY at Mundra Utility (MUL) to 948MUs. The distribution loss at AEML further improved to 4.77% in FY25 from 5.29% in FY24.
Revise to Accumulate; TP raised to INR 1,013: ADANIENS is poised for strong growth across transmission, distribution, and smart meters. So, we raise our SoTP-TP to INR 1,013 from INR 930. We value the regulated distribution and transmission asset at 2.5x FY27E P/BV. We ascribe a 13x FY27E EV/EBITDA multiple to its TBCB transmission assets and a 10x EV/EBITDA FY27E to its smart metering segment. We assign an option value of INR 156 to upcoming smart meters projects and an option value of INR 150 to the opportunity from NEP transmission. However, we revise our rating to Accumulate from Buy on the recent appreciation in the stock price.
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SEBI Registration number is INH000000933
