Adani Power shares could grow another 23%, says JM Financial while initiating coverage

Domestic brokerage firm JM Financial has initiated coverage on Adani Power with a ‘Buy’ rating, setting a target price of Rs 178 per share. This implies a potential upside of 22.8% over the current market price of around Rs 145.The brokerage’s optimism stems from the company’s strong execution capabilities, dominant position in thermal energy and robust energy demand prospects in India.

JM Financial highlights that Adani Power has strategically built capabilities to become India’s largest private sector thermal energy producer, currently operating at 18.1 GW. The company now aims to scale up its capacity to 41.9 GW by FY32, with a combination of 10.8 GW organic and 7.3 GW inorganic capacity.The brokerage notes that Adani Power has been the first to act in synchronizing critical assets such as the 4,620MW Mundra project within a timeline of 36 months and pre-ordering key equipment to avoid delays.

The report further highlights the indispensability of thermal energy in meeting India’s projected peak energy demand of over 700 GW by 2047.

With the increasing penetration of variable renewable energy sources such as solar and wind, JM Financial believes that grid reliability will depend on reliable baseload thermal generation. India’s coal-fired generation capacity is estimated to reach 340 GW by 2047, with incremental additions of 137 GW required to achieve this target.

In this context, Adani Power’s early positioning and aggressive capacity expansion provide a significant advantage. On financial metrics, JM Financial expects EBITDA per MW to rise from Rs 13 million/MW in FY25 to Rs 18 million/MW in FY32. Net debt/EBITDA is expected to rise from 1.6x in FY25 to 3.0x in FY29, given rising debt for capital expenditure of Rs 2 trillion over FY25-32.

However, this is expected to decline to 1.6x in FY31 as operational capacity comes online.

The brokerage expects Adani Power to achieve a revenue/EBITDA CAGR of 15%/18% in FY25-28, driven by strong operational performance and capacity expansion. Superior metrics such as a factory occupancy factor (PLF) of 71% and a factory availability factor (PAF) of 91%, along with secured project components, have strengthened the case for sustainable profit growth.

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