Adani Power Gets New 'Buy' From Jefferies With 30% Potential Upside—Here's Why

Adani Power Ltd. received a coverage initiation from Jefferies, seeing a 30% potential upside for the stock, citing increasing capacity and recovery in power demand.

The brokerage gave a 'buy' rating for the stock with a target price of Rs 509 per share. The second-largest thermal power generation company is on its journey to raise capacity by 1.7 times by 2030, Jefferies said. Land requirements and financing plans to increase the capacity to 30.7 gigawatts are in place, it added.

The Adani Group's merchant capacity should be 12-13% by fiscal 2030, it said. "We believe power demand should recover back to 7% levels versus recent weakness, which is similar to the past capex upcycle phase of fiscal 2003-09."

Jefferies expects the debt requirements to peak in fiscal 2025-27 at 1.4 times net debt versus one times in the previous fiscal. As new capacity becomes operational, Adani Power should see 10% Ebitda CAGR in fiscal 2024-27E, rising to 19% CACR over fiscal 2027-30, Jefferies said.

Past power purchase agreement issues returning, lower merchant realisations, demand disappointment and payment delays are the key risks to Jefferies' view.

Adani Power's share price rose 0.28% to Rs 515.7 apiece today. It, however, pared gains to trade 2.13% lower at Rs 503.5 apiece as of 10:18 a.m., as compared to a 1.02% decline in the NSE Nifty 50 index.

The stock fell 10% in 12 months. Total traded volume so far in the day stood at 0.9 times its 30-day average. The relative strength index was at 70.

Two analysts tracking the company have a 'buy' rating, according to Bloomberg data. The average 12-month consensus price target implies an upside of 30%.