Target: ₹660
CMP: ₹506.55
Adani Power (APL) is India’s second-largest thermal power generation company after NTPC, on its journey to raise capacity by 1.7x from 17.6 GW to 30.7 GW by 2030. Land requirements and financing plans are in place. Close co-ordination with BHEL for equipment delivery and in- house EPC are ensuring capex is on schedule. Thermal capacity in an overall peak deficit scenario with merchant exposure is a positive.
APL operates 12 power plants across eight States with 87 per cent capacity tied up with Power Purchase Agreements (PPA). About 98 per cent of the open capacity is closer to coal mines, enabling economic sourcing of coal. Coastal plants (43 per cent capacity) are dependent on imported coal but have a fuel cost pass- through/index-linked price escalation in place.
APL’s merchant capacity should be 12-13 per cent by FY30E, with an EBITDA contribution of 19-20 per cent vs closer to 30 per cent currently. We assume ₹6/unit merchant realisations, vs ₹7/unit average realisation for APL in FY24. Every 5 per cent rise in merchant realisation is a 2 per cent rise in FY27 EBITDA.
Strong project pipeline, land bank and equipment awards provide visibility on achieving 30 GW capacity target by 2030. We forecast 14 per cent FY24-30 EBITDA CAGR, driven by new capacity addition.
We initiate coverage at Buy at a base price target of ₹660.