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Strong EBITDA growth ahead; valuations turn full

ADANIENS reported a steady performance with Q4FY26/FY26 EBITDA (ex-SCA) growing ~13% YoY. And the growth trajectory is expected to materially accelerate over FY27–28E, with EBITDA estimated to rise by ~42% and ~24% YoY, respectively, driven by significant capitalization of ~INR 210bn in FY27E and ~INR 130bn in FY28E across transmission, distribution, and smart metering segments. The transmission business continues to provide strong visibility, with the order book increasing to INR 718bn in FY26 (vs. INR 599bn YoY) and management guiding for a robust opportunity pipeline of INR 0.8–1.0 trillion overthe next 12 months, while the smart metering segment builds a longer-term growth runway supported by a sizeable untapped opportunity of ~90– 100 million meters across states such as Tamil Nadu, Karnataka, Telangana, Andhra Pradesh, Gujarat, and Madhya Pradesh. Despite this strong growth outlook, the recent stock price appreciation leaves valuations at ~17.5x FY28E EV/EBITDA, implying a meaningful premium to peers trading at 8–12x, thereby limiting near-term upside; accordingly, we change the stock to Hold (from Accumulate) with a revised SOTPbased target price of INR 1,452 (refer exhibit 4).

n-Line Quarter:

AESL reported a strong Q4FY26 performance with revenue at INR 74.4 Bn, up 17% YoY and 11% QoQ, beating estimates by ~7%. Growth was primarily driven by transmission (INR 28.3 Bn, +26% YoY) and a sharp ramp-up in smart metering (INR 3 Bn, ~10x YoY), while distribution remained flat at ~INR 29 Bn. EBITDA (ex-SCA) stood at INR 19.8 Bn (+13% YoY), supported by strong smart meter EBITDA (INR 1.8 Bn, ~11x YoY), partly offset by weaker distribution performance. Reported PAT declined 3% YoY; however, adjusted PAT grew 28% YoY driven by operating performance.

Guidance intact:

Company guided for planned capex of ~INR 210–220 Bn pa in FY27 and FY28, primarily led by transmission, Capitalization is guided at ~INR 210+ Bn in FY27. The company highlighted that the current EBITDA base can potentially 2–3x over the next 3–4 years, supported by execution of its ~INR 720 Bn under-construction asset pipeline and incremental tariff accruals of ~INR 100 Bn upon full commissioning. Segment-wise, transmission remains the key earnings driver with stable regulated returns, while distribution offers steady cash flows, smart metering (~10 million annual installations) builds an annuity stream, and the C&I portfolio (~5 GW tied up) adds higher-margin growth optionality.

Leverage to be range bound:

Company guided that it would maintain net debt/EBITDA in the range of ~4.5– 4.7x, despite a significant capex ramp-up of ~INR 210–220 Bn annually, with funding largely structured at a ~70:30 debt-to-equity mix. While absolute net debt is expected to increase alongside the expanding asset base (given the ~INR 720 Bn under-construction pipeline), management emphasized that leverage ratios will remain stable as EBITDA scales up. The company has also improved its credit profile to AAA ratings, leading to a reduction in borrowing costs and supporting overall financial efficiency.

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