Jefferies initiates coverage on Adani Power with ‘Buy’ rating, sees 30% upside

Jefferies India has initiated coverage on Adani Power Ltd with a ‘Buy’ rating, forecasting a 30 percent potential upside to Rs660 a share from its current price. The potential upside in the stock is driven by expectations of increased earnings as Adani Power, India’s second-largest thermal power generation company after NTPC, expands its capacity.

The company is on track to nearly double its capacity from 17.6 GW to 30.7 GW by 2030, which is expected to boost its revenue and profitability. The company has secured coal linkages for its PPA-based plants through long-term Fuel Supply Agreements (FSAs) or pass-through mechanisms for imported coal.

Meanwhile, merchant capacities have access to both domestic and imported coal, with fluctuations in merchant power prices helping to offset volatility in coal costs. Jefferies estimates that every 5 percent increase in merchant realizations could result in a 2 percent rise in FY27E EBITDA.

In a base case scenario, Jefferies expects merchant realizations at Rs 6/unit, similar to FY24, driven by sustained demand-supply tightness, with Revenue and EBITDA CAGR of 19% and 14%, respectively, over FY24-30E. In an upside scenario, it expect 48 percent rise in stock price to Rs 755 a share. It said a sharp rise in power demand could drive higher merchant realizations of Rs 7/unit, similar to FY24, resulting in Revenue and EBITDA CAGR of 19% and 16%, respectively, over FY24-30E.