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Adani Energy Solutions (AESL IN) is set to post robust growth in its transmission, distribution, and smart meters businesses. Transmission EBITDA is likely to double to INR 76bn by FY27E, driven by India's renewable energy (RE) target, 20-25% market share in INR 840bn near term transmission bid and an INR 548bn project pipeline. In distribution, Mundra SEZ demand is set to surge from 50MW to 5GW, pushing regulated asset base (RAB) to INR 15-20bn while Mumbai operations would get annual capex of INR 12-15bn, which would increase regulated equity to INR 60bn by FY27E. AESL also dominates the smart meters space with a 17% market share at 23mn meters, sustaining an EBITDA margin of 85%. We initiate AESL with a Buy rating and a SOTP-based TP of INR 930.

Transmission EBITDA to double in the next three years: The Government of India’s (GoI) goal to achieve 500GW of renewable energy (RE) capacity needs a robust transmission network for green power evacuation, driving a surge in bidding activity for transmission projects. Industry estimates a near-term bidding value at INR 840bn, with AESL likely to secure a 20-25% market share. Currently, the company holds transmission projects worth INR 548bn slated for completion within the next 18-24 months. Following its QIP in FY25, it has secured five additional projects valued at INR 388bn. These new projects are likely to generate incremental EBITDA of ~INR 70bn, effectively doubling EBITDA from the current INR 40bn to around INR 76bn by FY27E

Growth potential in Mundra DISCOM: AESL operates two distribution companies, one at Mumbai and the other at Mundra. Mumbai RAB is INR 76bn as on FY25YTD while Mundra RAB is INR 500mn. Power demand at Mundra SEZ is likely to rise significantly, from the current 50MW to 5GW, driven by the Adani Group's plans to establish three major businesses in the SEZ. Growth is likely to increase RAB of Mundra’s distribution company in the range of INR 15-20bn by FY27E.

Smart meters emerges as key catalyst: The GoI has launched an ambitious smart meters initiative targeting 250mn households. AESL’s experience in operating in operating Mumbai DISCOM has led it to emerge as a key player in this program, securing an orderbook of 23mn as on FY25YTD. The installation of each meter needs an upfront capital investment of INR 5,800. During the 90-month agreement term, the company is likely to generate revenue of INR 12,000 per meter. The company is set to sustain an EBITDA margin of 85% in this vertical.

Initiate with Buy and a TP of INR 930: We initiate on AESL with a Buy rating and a SOTPbased TP of INR 930. The valuation assumes regulated transmission assets at 2.5x FY27E P/BV, TBCB transmission projects at 14.0x FY27E EV/EBITDA, distribution assets at 2.5x FY27E P/BV, and smart meters at 12.0x FY27E EV/EBITDA. Additionally, we attribute an option value of INR 196 per share for its upcoming smart meter projects and INR 156 per share for the new transmission projects under National electricity plan. (NEP) opportunity. We expect an EBITDA CAGR of 26% and an EPS CAGR of 29% during FY24- 27E. Key risks include increased competition and the need for timely project execution.

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