Ahmedabad, Feb 20 Global brokerage Elara Capital on Thursday initiated coverage on Adani Energy Solutions Ltd (AESL) with a 'BUY' rating and a share price target of Rs 930 -- implying a 37 per cent potential upside from the current market price.
Adani Energy Solutions is set to post robust growth in its transmission, distribution, and smart meters businesses. Transmission EBITDA is likely to double to Rs 76 billion by FY27E, driven by India's renewable energy (RE) target, 20-25 per cent market share in Rs 840 billion near-term transmission bid and a Rs 548 billion project pipeline.
In distribution, Mundra SEZ demand is set to surge from 50MW to 5GW, pushing the regulated asset base (RAB) to Rs 15-20 billion while Mumbai operations would get annual capex of Rs 12-15 billion, which would increase regulated equity to Rs 60 billion by FY27E, according to the brokerage.
"AESL also dominates the smart meters space with a 17 per cent market share at 23 mn metres, sustaining an EBITDA margin of 85 per cent. We initiate AESL with a Buy rating and a SOTP-based TP of Rs 930," said Elara Capital in its note.
The robust transmission pipeline and strong market share of Adani Energy Solutions in transmission bids, emerging lever in the form of smart metering business and consistent RAB expansion opportunity in distribution circles, continue to be the key segment levers playing out in the Adani Group company.
According to the brokerage, the government’s goal to achieve 500GW of renewable energy (RE) capacity needs a robust transmission network for green power evacuation, driving a surge in bidding activity for transmission projects.
Industry estimates a near-term bidding value at Rs 840 billion, with AESL likely to secure a 20-25 per cent market share.
Currently, the company holds transmission projects worth Rs 548 billion slated for completion within the next 18-24 months.
Following its Qualified Institutional Placement (QIP) in FY25, it has secured five additional projects valued at Rs 388 billion.
These new projects are likely to generate incremental EBITDA of Rs 70 billion, effectively doubling EBITDA from the current Rs 40 billion to around Rs 76 billion by FY27E, according to the Elara Capital note.
"Additionally, we attribute an option value of Rs 196 per share for its upcoming smart meter projects and Rs 156 per share for the new transmission projects under the National electricity plan," it added.
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