Adani Green Energy stock slides 4% despite Emkay's 'Buy' rating, influenced by new Hindenburg report

So far this year, Adani Green Energy stock has gained around 8 percent, underperforming benchmark Nifty's returns of around 12 percent.

Emkay Global has initiated coverage on Adani Green Energy with a 'buy' recommendation and a target price of Rs 2,550 per share. The Adani Group firm is expected to achieve a robust growth trajectory, supported by its strategic asset base and significant potential in the renewable energy sector.

Adani Green Energy has exhibited remarkable growth, with its operational renewable energy (RE) capacity expanding at a 41 percent CAGR over the past five years, Emkay said.

The company is well-positioned with substantial solar and wind development sites across Gujarat and Rajasthan, exceeding 50GW in total, it added.

Development, technological advancements

Additionally, the company has secured over 5GW for pumped storage projects (PSP), further bolstering its growth trajectory, according to analysts. Future development will be concentrated in the Gujarat-Rajasthan supersites, particularly the Khavda site, which represents 67 percent of AGEL’s total capacity.

These locations are among the highest globally in terms of resource yield, with solar irradiance at 2,060 kWh/sqm and wind speeds of 8 m/s, resulting in a capacity utilization factor (CUF) of 33 percent for solar and over 35 percent for wind, Emkay noted.

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With technological advancements, Adani Green Energy’s CUF is expected to increase, enhancing its competitiveness in future power purchase agreement (PPA) bidding and ensuring sustained margin protection and balance sheet stability, the brokerage said.

The Adani firm has outlined an ambitious growth strategy, aiming to achieve a total Renewable Energy (RE) capacity of 56.5GW by FY29-30, including 6.5GW from PSP projects. Notably, 30GW of this capacity will be concentrated in the Khavda site.

The company’s market share in plain vanilla RE is anticipated to grow to 15 percent by FY30E, up from 8 percent in FY24, while its merchant capacity is projected to rise to 20 percent from the current 5-6 percent, said Emkay.

Financially, Adani Green Energy benefits from a diversified capital base, including US$3.4 billion in revolving construction facilities provided by banks, as well as access to global bond markets for cost-effective long-term financing during the operational phase, according to analysts at Emkay Global.

Following a substantial Rs 7,000 crore infusion from promoters, the company plans to fund future growth through internal accruals.

Financial Position

Despite a significant increase in the consolidated adjusted net debt of Adani Green to Rs 53,900 crore as of FY24, up from Rs 9,200 billion in FY18, leverage ratios peaked in FY22. The net debt-to-EBITDA ratio was 7.4x at the end of FY24 but is expected to improve to 3.6x by FY30E, even with net debt rising to Rs 1.86 lakh crore due to a Rs 2.36 lakh crore capex plan.

The company’s cost of debt, currently above 9 percent, is expected to decline gradually, supported by favorable funding conditions and the incorporation of global best practices through partnerships such as with Total, said Emkay.

Market performance

Despite the bullish rating from Emkay, Adani Green Energy shares were trading with losses of around 4 percent.

The fall comes after a new report released over the weekend by US-based short-seller Hindenburg Research has alleged that market regulator Securities and Exchange Board of India's (SEBI) reluctance to act against the Adani Group might be linked to its chief Madhabi Puri Buch, having stakes in offshore funds associated with the conglomerate.

Also Read | Hindenburg responds to SEBI chief Madhabi Puri Buch’s statement, raises new questions

At 9:34 am Adani Green Energy shares were trading 3.6 percent lower at Rs 1,717 on the National Stock Exchange (NSE). So far this year, the stock has gained around 8 percent, underperforming benchmark Nifty's returns of around 12 percent.

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