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Key Points

Morgan Stanley has initiated an Overweight rating on Adani Power with a 29% upside target. The brokerage calls the company a remarkable turnaround story in India's corporate history. They project massive growth with capacity and EBITDA multiplying by 2033. The firm's strong balance sheet and resolved regulatory issues position it for significant expansion.

Key Points: Morgan Stanley Calls Adani Power Turnaround with 29 Percent Upside

  • Morgan Stanley initiates Overweight rating with Rs 818 target price
  • Forecasts 2.5x capacity growth and 3x EBITDA rise by FY33
  • Notes resolution of most regulatory issues and strong balance sheet
  • Expects 60-65% of $27B capex met through internal accruals
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Adani Power a turnaround in India's corporate history, says Morgan Stanley with 29 pc stock upside

Morgan Stanley initiates 'Overweight' on Adani Power, projecting 29% stock upside and calling it a major turnaround story in India's corporate history.

"a good illustration of turnaround in India's corporate history - Morgan Stanley"

Mumbai, Sep 19

Shares of Adani Power Ltd (APL) surged in the morning trade on Friday after global brokerage Morgan Stanley initiated 'Overweight' on the company with a target price of Rs 818, projecting an upside of 29 per cent from its previous closing price.

The brokerage said in a note that Adani Power is “a good illustration of turnaround in India's corporate history, with resolution on most regulatory issues and multiple value-accretive acquisitions”.

“APL will deliver strong earnings growth driven by timely completion of projects and more PPA wins medium term. Initiate at OW (Overweight) and Top Pick,” said the brokerage.

New coal power purchase agreements (PPAs) should improve investor confidence in earnings power, Morgan Stanley added.

It also forecast that the company's capacity and earnings before interest, taxes, depreciation and amortisation (EBITDA) will rise 2.5 times and 3 times by the financial year 2033, respectively.

“We believe coal holds the key to India's energy security, with nuclear being a driver in the next decade. India is looking to add 80GW of coal by F32; there is currently a large power purchase agreement (PPA) pipeline of 20GW,” according to the note.

The stock was trading about 7-8 per cent up in the morning trade. Shares of Adani Power ended the previous session 0.5 per cent up.

Adani Ports is India's largest independent power producer and second-largest power producer (after NTPC) with 8 per cent share in both coal and generation.

“We forecast its market share to reach 15 per cent by F32e with a 41.9GW portfolio (2.5x vs F25). APL has seen favourable resolution of most regulatory issues and has a strong balance sheet (F25 net debt/EBITDA: 1.5x). We expect 60-65 per cent of its US$27 billion capex for a 23.7GW addition to be met through internal accruals,” said the brokerage.

Incrementally timely project completions (land acquired, boiler- turbine-generator orders placed, construction execution by Adani Group, and lower external debt) combined with PPAs getting signed would drive earnings.

“We see upside to our estimates if APL's merchant portfolio declines from 20 per cent currently, and profitability in recently acquired 2.9GW power plants improves,” the brokerage note said.

- IANS

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Reader Comments

P
Priya S
While the growth numbers look impressive, I hope they're also investing in renewable energy. Coal power can't be our only focus given climate commitments.
A
Aman W
Bought some shares last month and already seeing good returns. Adani companies have consistently delivered for investors who believe in India's growth story.
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Sarah B
Interesting analysis. The 29% upside projection seems optimistic but Morgan Stanley's track record in Indian markets has been fairly reliable. Might consider adding to my portfolio.
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Vikram M
The turnaround story is impressive, but I remember the Hindenburg report. Hope the corporate governance issues are truly resolved. Due diligence is important before investing.
K
Karthik V
80GW coal capacity addition shows our energy demands are massive. Adani's execution capabilities will be crucial for meeting India's power needs. Good for long-term investors.

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