Adani Energy Solutions Ltd, a prominent player in the energy sector, has recently faced a significant decline in its stock value, falling by a staggering 50% from its peak in August 2024. Despite this downturn, Elara Securities, a respected brokerage firm, has recommended investors to consider buying Adani Energy Solutions stock, offering a ‘Buy’ rating and setting a target price of Rs 930 per share. This optimistic outlook suggests a potential 37% increase in value for the Adani group stock in the near future.
Insights from Elara Securities
Elara Securities has projected impressive growth prospects for Adani Energy Solutions, forecasting an Ebitda growth of 26% compounded annually and an EPS CAGR of 29% for the fiscal years 2024 to 2027. The brokerage firm highlighted the transmission Ebitda of Adani Energy Solutions, expecting it to double to Rs 7,600 crore by FY27. This growth is attributed to various factors, including India’s renewable energy targets, a significant market share in transmission bids, and a robust project pipeline amounting to Rs 54,800 crore.
Moreover, Elara Securities emphasized the potential surge in demand for electricity in Mundra SEZ, projecting an increase from 50MW to 5GW. This surge is expected to drive the regulated asset base (RAB) to Rs 1,500-2,000 crore, indicating substantial growth opportunities for Adani Energy Solutions. Additionally, the Mumbai operations of the company are anticipated to receive significant annual capital expenditure, leading to a rise in regulated equity to Rs 6,000 crore by FY27.
Strategic Positioning and Growth Initiatives
Adani Energy Solutions has strategically positioned itself as a dominant player in the smart meters segment, boasting a 17% market share with 23 million meters in operation. The company has maintained an impressive Ebitda margin of 85% in this sector, indicating strong operational efficiency and profitability. Elara Securities has initiated coverage on Adani Energy Solutions with a ‘Buy’ rating and a target price of Rs 930 based on a sum-of-the-parts (SOTP) valuation.
Furthermore, following a successful Qualified Institutional Placement (QIP) in FY25, Adani Energy Solutions has secured five additional transmission projects valued at Rs 38,800 crore. These projects are expected to significantly enhance the company’s Ebitda, potentially doubling it from the current Rs 4,000 crore to around Rs 7,600 crore by FY27. The company’s operations in Mumbai and Mundra are poised for substantial growth, with the Mundra RAB projected to increase to Rs 1,500-2,000 crore by FY27.
Elara Securities also highlighted the company’s strong performance in the installation of smart meters, with each meter requiring an upfront capital investment of Rs 5,800. Over a 90-month agreement period, Adani Energy Solutions is expected to generate revenue of Rs 12,000 per meter, reflecting a lucrative business opportunity in the energy sector. The company’s focus on operational excellence and efficiency is evident in sustaining an Ebitda margin of 85% in the smart meters vertical.
In conclusion, despite the recent decline in its stock value, Adani Energy Solutions presents a compelling investment opportunity, backed by strong growth projections, strategic initiatives, and a robust project pipeline. Investors are advised to consider the long-term potential of the company and consult with financial experts before making any investment decisions.
