Buy Adani Green Energy Ltd For Target Rs 1,500 By Emkay Global Financial Services Ltd
AGEL’s consolidated Q4FY26 EBITDA rose 20% YoY to Rs28.8bn (up 29% QoQ; 3% beat), led by 35% YoY uptick in operational capacity to 19.3GW. Power sales growth was 26% YoY and 23% QoQ, with CUFs improving sequentially. Q4 earnings were supported by commissioning of transmission lines in Rajasthan and Khavda, along with better merchant realizations. The company saw FY26 EBITDA impact of Rs5bn due to curtailment; however, this should reverse, with the company accelerating BESS deployment as a strategic hedge against evacuation constraints, targeting 10GWh addition in FY27. FY27 RE capacity addition guidance is capped at 4.5-5GW due to transmission constraints, though with ~14GW of evacuation capacity slated to come up in Khavda by Mar-27, additions could accelerate thereafter. We keep FY27-28E earnings largely unchanged and roll forward valuation to Mar-27E, increasing our TP by ~11% to Rs1,500 from Rs1,350; retain BUY.
Result Highlights
AGEL reported Q4FY26 consolidated revenue of Rs35.0bn, up 14%/34% YoY/QoQ, primarily owing to a sharp uptick in sale of equipment and other operating income. On the back of a robust 35% YoY growth in operational capacity, core power supply revenue grew 16% YoY to Rs30.9bn (in-line; up 28% QoQ); however, CUFs were slightly lower YoY, but improved QoQ. Book realization declined 8% YoY to Rs3.1/kWh, but increased 4% QoQ supported by a sequential improvement in merchant tariffs. Power supply EBITDA rose 20% YoY/30% QoQ to Rs29.4bn, with EBITDAM improving to 95%. Finance cost was up 19% YoY to Rs16.3bn (down 4% QoQ), while net debt rose 32% YoY to Rs960.9bn (up 20% HoH). D/A was largely flat QoQ at Rs8.9bn, while other income of Rs2.3bn was at a 25% beat and up 5%/3% YoY/QoQ. Share of profit from associates/JVs declined 10%/20% YoY/QoQ to Rs820mn. APAT (after MI) came in at Rs4.9bn vs Rs3.5bn YoY and net loss of Rs330mn QoQ. Share of merchant and infirm power rose to 40% from 33% YoY.
Management KTAs
AGEL can add ~7–8GWpa of RE capacity, though it has given guidance for FY27 additions at 4.5–5GW due to evacuation constraints. Normalized BESS EBITDA is expected at ~Rs2.5mn/MWh against capex of ~Rs15mn/MWh. FY26 saw higher merchant exposure due to early commissioning of projects for ISTS waiver benefits; however, going forward, >90% of the additions (including the entire 4.5–5GW in FY27) will be PPA-linked. Blended PPA tariff is Rs3.1/KWh, with current solar and wind rates at Rs2.65/KWh and Rs3.75- 3.8/KWh. FY27 capex guidance is >Rs400bn, including Rs150bn for BESS.
Valuation
We value AGEL at 12x FY31E EV/EBITDA, discounted at 15% (CoE) to Mar-27E; this is reasonably conservative and backed by >30%/60% revenue/earnings CAGR over FY26- 30E. We have not factored in BESS, which provides additional potential upside. Key risks: project execution, policy, equipment inflation, technology, resource-yield related.
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