Adani Energy Solutions shares could deliver multibagger returns from current levels

Brokerage house Cantor has initiated coverage on the company with an ‘Overweight’ rating and price target of Rs 2,251, implying an 129% upside on FY26 basis.

Cantor forecasted that company revenue would grow at a CAGR of 20% from FY24 to FY27E and the adjusted EBITDA would grow at a CAGR of 28.8%.

The brokerage has used relative valuation to value Adani Energy, with peers trading at an average CY25/FY26E EV/EBITDA multiple of 10.9x, which compares to the company that is trading at 12.8x.

On a growth adjusted basis, Cantor came up with a target price of Rs 2,251 being based on a 26.5x FY26 EV/EBITDA multiple.

“The transmission business will see strong growth as it completes the nine projects it has recently been awarded over the next 18-24 months. Distribution business should be able to grow at/near double-digit rates as it continues to add to its regulatory asset base,” the brokerage said.The company reported a consolidated net loss at Rs 824 crore for the quarter ended June 2024 as against Rs 175 crore net profit a year ago. Meanwhile, revenue from operations were up 47% to Rs 5,379 crore.”Adani Energy is more expensive on a multiple basis, but is also growing meaningfully faster than its peers. Secondly, we believe AESL is a more diversified business,” Cantor noted.

Following a recent capital raise, Adani Energy is now well-funded to drive growth across all major segments.

“Ultimately, we believe shares are attractive at current levels. On a growth-adjusted basis, shares currently trade at a 60% discount to peers, when in our view, it should trade at an in-line multiple,” it said.