Adani Power Gets Yet Another Bullish Call From Morgan Stanley — Check Target Price

Morgan Stanley continues to remain bullish on Adani Power on account of its aggressive expansion plans and robust growth outlook, as the company continues to play a key role in India's growth story.

In its latest note, Morgan Stanley has maintained an 'overweight' rating on Adani Power, with an unchanged target price of Rs 185.

The shares of Adani Power are currently trading at Rs 140 as of Thursday's market close. This implies a whopping 32% upside for the stock if Morgan Stanley's target is met.

The brokerage firm is bullish on Adani Power on multiple factors, but especially its massive capacity expansion with industry-leading efficiency.

The firm noted that Adani Power's strategic roadmap is to tie up 100% of its 23.7 gigawatts (GW) of under-construction capacity by next year.

Furthermore, the company aims to aggressively reduce its untied capacity from the current 10% to a lean 3-4%, which in turn, could significantly improve Adani Power's revenue visibility.

Another key growth lever for Adani Power is its superior capital efficiency. Morgan Stanley notes that the company's capital expenditure is estimated at Rs 9.5-10 crore per megawatt, which is significantly lower than the industry average of Rs 15 crore per megawatt.

This cost advantage that Adani Power has is attributed to advance equipment ordering and faster execution. These factors also help the company shield itself from inflationary pressures and delays.

On the financial front, Adani Power's expansion plans have a solid foundation. The total capex for the 23.7 gigawatt capacity addition is pegged at Rs 2 lakh crore.

As the company had confirmed earlier, a substantial Rs 1.4 lakh crore of this will be funded through internal accruals, with only Rs 60,000 crore required from domestic debt. As such, the entire balance sheet remains healthy.

Meanwhile, on the operational front, the brokerage expects Adani Power to command robust margins, forecasting an Ebitda of Rs 3.7 per unit for new bids at current tariffs.

Keeping these factors in mind, Adani Power remains on a strong footing and has significant room for upside.