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Adani Green Energy Ltd. can bag more power purchasing agreements with a boost to its cost leadership and industry-leading metrics on the back of strong financial performance, said Emkay while initiating coverage on the stock.
The brokerage initiated a "buy" on the renewable power generator with a target price of Rs 2,550, according to a note dated August 9, implying an upside of over 43% against the previous closing price.
Emkay expects Adani Green's operating profit and adjusted net profit to grow at compounded annual growth rate of 38% and 61%, respectively during FY24-30.
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Resource Rich Sites
Adani Green Energy has secured sites for over 50 gigawatts for solar-wind development in Gujarat and Rajasthan, Emkay said. These sites have the highest global resource yield, and concentrated development would help improve the company's capacity utilisation factor, it said.
A higher capacity utilisation factor would improve the company's cost leadership while maintaining margins and making it more competitive in future bidding rounds. The brokerage expects the improving capacity utilisation factor to drive power sales growth at a 35% compounded annual growth rate over fiscal 2024–2030.
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Over the last five years, Adani Green Energy's renewable energy capacity has grown at a 41% compound annual growth rate. The brokerage now expects capacity to grow at a 30% compounded annual growth rate over fiscal 2024-2030.
Adani Green Energy's plain vanilla renewable energy market share will grow to 15% by fiscal 2030 from 8% as of fiscal 2024, Emkay Research said.
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Improving Leverage Ratios
The brokerage expects the company's leverage ratios to improve despite its heavy capex plans; it expects the company's net debt to Ebitda ratio to reduce from 7.4-times currently to 3.6-times by fiscal 2030, with the cost of debt declining gradually.
The company has a diversified source of funding, with $3.4 billion of revolving construction loans from banks as well as access to cheaper long-term global bond markets for ongoing operations, Emkay said. Furthermore, with the company's recent receipt of the remainder of the Rs 7,000 crore promoter infusion, the brokerage believes that the company's future growth can now be ensured via internal accruals.
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