The upside potential as stated above is from the stock’s present share price at Rs 513.
“APL, India’s largest private pure-play thermal power producer, is strategically positioned with robust capacity expansion plans to address this critical demand. We recommend BUY with an upward revised DCF-based price target of INR 806 (13.8X FY27 EV/EBITDA), representing an upside of 54.5%,” said Ventura in its report.
Ventura Securities further stated that the company’s strong growth visibility justifies premium valuation.
While APL’s FY27 valuation appears expensive, its superior profit growth-to-RoIC ratio and industry’s one of the leading revenues & EBITDA performance outshine most of its peers, the domestic brokerage firm said.
Additionally, Ventura stated that its bull case scenario for FY27 will result in a target price of Rs 990 for the stock.Also read: Bank of Japan hikes policy rates by 25 basis points to highest in 17 yearsHere are the 5 reasons why Ventura Securities believes one should invest in APL:
1. Secure Business Model
The company boasts a strong and secure business model. A significant portion of its capacity, 80%, is contracted under long-term, remunerative Power Purchase Agreements (PPAs). Additionally, 84% of its domestic fuel requirements are secured through long-term contracts, ensuring a stable and reliable fuel supply.
2. Regulatory Stability
The company has achieved full resolution of all regulatory matters pertaining to domestic coal shortfall following the Supreme Court’s orders dated 20th April 2023. Furthermore, the company is able to recover alternate fuel costs under change-in-law clauses of PPAs, providing further financial stability.
3. Sectoral Growth Potential
The Indian power sector presents significant growth opportunities for the company. With 17.55 GW of operating assets and a robust growth pipeline of 13.12 GW, the company is well-positioned to capitalize on the growing demand for dispatchable power capacity. The easing of fuel availability constraints further enables greater capacity expansion.
4. Projection Execution, State-of-the-Art Facilities, and Operational Excellence
The Adani Group is renowned for its exceptional project execution capabilities. The company has demonstrated its expertise through the successful development of supercritical power projects and the efficient turnaround of acquired power assets. The company also excels in power plant operations and fuel & logistics management, leveraging its subsidiaries AIMSL and ENOC.
5. Strong Liquidity Backing
The company maintains a strong debt servicing capability, reflected in its Credit Rating AA, with abundant headroom for future growth. It is backed by the Adani Group, India’s largest infrastructure and real asset platform, providing strong financial support and stability.
However, the domestic brokerage firm also highlighted a Bear case scenario for the stock, which may take it down to Rs 492 level.
Today, around 1:30 pm, the shares of Adani Power were trading 1.5% lower at Rs 513.65 on the BSE.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
