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Adani Green Energy Ltd (AGEL) has shown remarkable growth with its operational renewable energy (RE) capacity expanding at a 41 per cent CAGR over the past five years, brokerage firm Emkay Global said on Monday, initiating coverage on the company with a 'buy' recommendation and a target price of Rs 2,550 per share -- over 50 per cent upside from current levels. 

The Adani Group firm is expected to achieve a robust growth trajectory, supported by its strategic asset base and significant potential in the renewable energy sector, according to the brokerage firm.

Adani Green has well-secured sites for solar-wind development in excess of 50GW in Gujarat and Rajasthan and a further 5GW+ for PSP (pump storage solutions and evacuation) with evacuation visibility.

“The momentum now on would be concentrated in the Gujarat-Rajasthan supersites (Khavda, with 67 per cent of capacity with AGEL),” the report noted.

According to the brokerage, Gujarat (Khavda) and Rajasthan sites (the most resource-rich sites globally) will help AGEL grow its revenues at 35 per cent CAGR from FY24-FY30.

“While the balance sheet is likely to expand, leverage ratios should improve, with net debt-to-EBITDA falling to 3.6 times from 7.4 times,” the brokerage noted.

AGEL has a diversified pool of capital, with $3.4 billion of revolving construction facilities from banks along with access to cheaper long-term global bond markets for the operational phase.

“We expect AGEL’s cost of debt to gradually decline. The total partnership also provides funding with global best practices,” said Emkay Global analysts.

They expect AGEL to clock operational RE capacity CAGR of 31 per cent to 56.5GW (including input solar for PSP) during FY24-30E, as the Khavda supersite is developed up to 30GW vs 2GW as of FY24-end (now at 2.3GW), coupled with expansion in other assets like Rajasthan and PSP.

“The company aims to achieve this by FY29 itself. We build in an effective capacity CAGR of 34 per cent and while there could be phasing delays in the intermediate, FY30 looks largely realizable,” said the report.

Solar/wind CUF (capacity utilisation factor) should increase, from 24.5 per cent/29.4 per cent in FY24 to 30.3 per cent/34 per cent by FY30E, as the share of high-yield assets like Khavda and Rajasthan grows coupled with better module technology, it added.