IIFL initiates coverage on Adani Power with target price at Rs 240, estimates EBITDA to quadruple by FY33-35E

The brokerage in a report said that its SoTP-based 12-month target price of Rs 240 per share values Adani at an implied FY28E EV/Ebitda of 20x, above the coverage median of 11.1x, reflecting its faster growth and superior profitability.

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It further highlighted that with a large growth pipeline, industry-leading execution, and complementary group renewables and energy-management businesses, Adani is estimated to quadruple EBITDA by FY33-35E.

While 60%+ of the fair value rests on unexecuted projects and the stock trades at a rich 4.6x FY28E P/BV, IIFL thinks that its industry-leading asset base and cash-flow profile justify the growth optionality. The brokerage initiated coverage with a ‘Buy’ rating.

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The report said that Adani is building 23.7GW of new coal capacity (more than NTPC’s pipeline of 17GW) that will more than double its 18GW operating base. It is expected that Adani’s free cash flow from operations will rise from Rs 170 billion in FY26 to Rs 570 billion on full portfolio buildout, with optionality from planned moves into nuclear (10GW capacity target by 2035) and hydro (5GW JV with Druk Green Power, Bhutan) as well.

The customer base is also expected to expand beyond DISCOMs, foraying into firm power supply to C&I customers.

A 20% EBITDA CAGR is forecasted over FY26–29E as some under-construction projects commission, making it among the fastest-growing non-renewable power gencos in India. The downside risks include execution delays, failure to sign PPAs, weak spot tariffs, competition from battery storage.

Adani Power is India’s largest private sector thermal power generation developer & operator, with an installed capacity of 18.2GW across a portfolio of pit‑head and coastal power plants. Its geographic mix and locational diversity provide it fuel flexibility, allowing it to source through a combination of domestic coal linkages, e-auctions, and imported coal.

The report further said that the company is now adding 23.7GW of organic thermal capacity (all ultra supercritical/supercritical). PPAs have already been secured for 56% of this pipeline, underpinning medium-term revenue visibility; the balance is expected to be tied up progressively or to operate merchants until contracted.

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According to IIFL, Adani’s operational portfolio (including highly value accretive acquired assets) is valued at 4.1x FY28E P/BV, driven by high RoE and backing of long term PPA certainty. Under construction portfolio for which the company has secured PPAs is valued at 2.4x FY28E P/BV, benefitting from low capex per GW secured by early equipment price lock-in and attractive PPA tariffs.

The under construction portfolio awaiting PPAs is valued at 1.8x, for the current uncertainty. However, the relatively low fixed cost base positions it favorably both, in securing PPAs and in the merchant market. Investments & optionalities cover Adani’s nuclear, hydro and C&I forays along with minority investments. Further, the brokerage firm also ascribes a merchant premium to the fleet, factoring the flexibility it will offer to the grid in a renewable-heavy setup in future.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)