Hold Adani Power; target of Rs 28: Edelweiss

Edelweiss' research report on Adani Power

Under the new coal policy ‘SHAKTI’, APL’s Tirora (5x660MW) and Kawai (2x660MW) are likely to get domestic coal linkages (through tariff based bidding). This could prune the fuel cost to less than INR 2.0/unit for Tirora from INR 2.15/unit currently.

Outlook

However, given the company’s high leverage (D/E at >10x in FY17), revival of cash flows is critical, which is not in sight and a key monitorable. At CMP, the stock trades at 3.1x and 2.7x FY18E and FY19E P/BV respectively. We maintain ‘HOLD/SU’ with SOTP-based target price of INR 28.