Adani Green Energy shares can rise 30%! What Investec says on renewable energy player

Investec is of the view that Adani Green is poised to clock five times growth in its installed capacity to over 50GW by FY30, replicating its historical growth rate of 5x to 11GW over FY19-24.

Investec has initiated coverage on India’s largest renewable energy company, Adani Green Energy, with a ‘Buy’ rating and a target price that suggests 30 per cent upside potential.

The foreign brokerage said Adani Green Energy is poised to clock 5 times growth in its installed capacity to 50GW-plus by FY30, replicating its historical growth rate of 5 times to 11GW over FY19-24. The growth would be led by 30GW/ 11GW installation in Rajasthan and Gujarat’s Khavda, where Adani Green Energy has access to large resource rich land bank along with evacuation facilities, Investec said.

“Also, usage of new age technology and higher share of merchant/C&I power will drive revenue/ Ebitda /PAT at a CAGR of 34 per cent/37 per cent/60 per cent over FY24-30 period. Strategic capital management, equity infusion by promoters/JV partners and healthy OCF negates the risk of equity dilution while maintaining comfortable D/E,” it said.

Investec values Adani Green Energy at 15 times FY30 consolidated Ebitda, adjusting for the FY29 net debt, to arrive at a target price of Rs 2,515. On Monday, Emkay Global maintained its ‘Buy’ rating on the stock and suggested a price target of Rs 2,550 per share.

Adani Green Energy’s capital management through strategic debt arrangements, equity infusions from promoters/JV partners and prudent handling of operating cash flow is efficient, Investec said adding that the Adani firm’s approach effectively mitigates the risk of equity dilution and would ensure a comfortable net debt-to-equity ratio of 2.1 times in FY30 against 3.1 times in FY24.

This is even as it sees a likely 3.4 times rise in net debt to Rs 1.87 lakh crore over FY24-FY30.

“Adoption of new age technology in resource rich sites like Khavda and Rajasthan will ensure higher CUF across stations (solar – 30 per cent, wind – 33 per cent & hybrids – 43 per cent). This coupled with higher share of merchant (15 per cent – FY30 vs 5 per cent – FY24) will drive 60 per cent CAGR of PAT over FY24-30E,” it said.

On Tuesday, the stock was trading 1.64 per cent higher at Rs 1,898.35 on BSE.

he strategic capital management, equity infusion by promoters, JV partners and healthy OCF negates risks of equity dilution while maintaining comfortable debt-to-equity, the brokerage firm added.

The analyst commentary comes a day after Adani Power and Adani Green Energy said they will sign separate contracts with MSEDCL for their respective supply components as permitted under the tender conditions.

This would be the largest solar power capacity award globally, following Adani Green’s green power award received in 2020. The thermal capacity award, on the other hand, is the largest in India.

Adani Green shares traded half a percent lower at ₹1,921.55 on NSE at 10:24 am. The stock is currently over 16% lower than the 52-week high it touched in June this year.

So far in 2024 (year-to-date), the stock has given a return of 20% to its investors as compared to the benchmark index Nifty 50 which has risen 16% during the period.

With Thanks Reference to:https://www.cnbctv18.com/market/investec-initiates-buy-rating-on-adani-green-expects-stock-to-rally-30-19477439.htm and https://www.businesstoday.in/markets/stocks/story/adani-green-energy-shares-can-rise-30-what-investec-says-on-renewable-energy-player-446217-2024-09-17