Accumulate Adani Power Ltd for Target Rs 220 by Elara Capital
Growth visibility intact; upside largely priced in
Thermal power is likely to remain critical to India’s near - to medium -term power security, supporting Adani Power’s (ADANI IN) long -term growth prospects . Its 24GW locked -in expansion, taking capacity from 18.3GW to 42 .0GW, provides strong growth visibility . Around 60% of the pipeline is Brownfield , enabling faster execution , while 55% is backed by long -term PPA. The company’s proven ability to acquir e and turn around stressed assets offers an additional avenue for value creation. However, we believe much of this growth potential is already reflected in the current valuation. Hence, w e initiate with an Accumulate rating and a TP of INR 22 0 based on 12x FY29E EV/EBITDA .
Thermal power – backbone of reliable baseload supply:
Thermal generation remains the backbone of India’s power system, providing reliable , dispatchable baseload capacity that helps offset renewable s intermittency and maintain grid stability. While renewable energy penetration is rising, its weather dependence and variable output require complementary investments in battery energy storage systems (BESS ) and pumped storage . T ransmission constraints and growing grid -balancing requirements further reinforce the need for firm power. Against this backdrop, coal would remain critical to India’s near - to medium -term energy security, with India targeting addition of ~80GW of coal -based capacity by FY32.
Growth runway of 42GW supported by locked-in expansion:
A DANI is India’s largest private thermal power generator, with operating capacity of 18.3GW across 13 assets, predominantly comprising high -efficiency supercritical and ultra -supercritical thermal plants. The company is pursuing one of the sector’s largest capacity expansion programs, with 24GW of locked -in capacity that would increase its targeted portfolio to 42GW. Around 60% of the pipeline is Brownfield , support ing faster execution and lower project cost. The portfolio is becoming increasingly contracted , with 55% of locked -in expansion , equivalent to 13.3GW, already backed by long -term PPA . The rest provides exposure to merchant opportunities as electricity demand rises and peak shortages persist . In addition to 24GW pipeline, A DANI continues to pursue thermal capacity through upcoming S tate-level bids.
Acquisitions: proven playbook to unlock value from stressed assets:
The company has demonstrated a strong ability to create value by acqui ring and turn ing around of stressed & under -utili zed ther mal assets . This provid es an additional , potentially capital -efficient avenue for capacity expansion . Its acquisition track record includ es Udupi Power (1.2GW), Coastal Energen (1.2GW) , and Lanco Amarkantak.
Initiate with Accumulate and a TP of INR 220:
We initiate on A DANI with an Accumulate rating and a TP of INR 22 0 based on 12x FY29E EV/EBITDA. T he company offers strong earnings visibility, supported by its 24GW locked -in capacity expansion, rising PPA coverage , and upside from merchant power . However , the stock has already rallied 27% YoY in the past year, outperforming the BSE Utilities Index . We believe a significant portion of the company’s medium -term growth opportunity is already reflected in the current valuation .
Please refer disclaimer at Report
SEBI Registration number is INH000000933
