ICICI Securities on Monday raised its target price on Adani Power Ltd to Rs 669 from Rs 610 earlier while retaining its ‘buy’ call on the stock, as it rolled forward its earnings estimates for the Adani group firm to FY28. The brokerage believes that new PPAs are being signed by Adani Power at attractive rates and said it sees a strong pipeline of new PPAs by state discoms.
Merchant markets are offering upside, the brokerage said adding that it is also positive on acquisition of new asset (Vidarbha).
On Monday, the Adani Power stock was trading 0.88 per cent higher at Rs 571.75 apiece. The scrip is down 17.15 per cent in the past one year.
India is witnessing strong power demand growth and ICICI Securities expects the base and peak power demand to grow at 6 per cent each over the next couple of years.
“Firm capacity addition has been low in the past five years; thus, to meet peak demand, India has to fall back on thermal capacity. Adani Power, being the largest private player, is likely to
add to this thermal capacity,” it said.
ICICI Securities said Adani Power has resolved its disputes, reduced the leverage and improved the profits of its operating assets. It is using its balance sheet to acquire assets at attractive prices, the domestic broking firm said.
“It is also setting up new assets to meet renewed demand for coal. It is ahead of competition in new build. As a result, it is able to tie up its existing assets under new long-term arrangements at attractive tariffs,” ICICI Securities said.
ICICI’s increased target comes in the background of 15.5 per cent drop in its consolidated net profit for Adani Power at Rs 3,305 crore in the June quarter on 5.9 per cent decline in revenue at Rs 14,167 crore. Its board approved a proposal of stock split, wherein existing Adani Power share with face value Rs 10 would be split into five equity shares of face value Rs 2 each.
“Weak power demand impacted the PLF of operational power plant and merchant prices in Q1FY26. Merchant realisation in Q1 declined to Rs 6.5/kWh (vs. Rs 7.6/kWh YoY). As a result, Adani Power (APL) reported Q1 with Ebitda and PAT degrowth at 8 per cent 16 per cent, respectively. Its dependence on merchant is currently at 22%
which could decline in next few years,” ICICI Securities said.
In Q1, Adani Power signed a PPA for 1.6GW at an attractive tariff, taking its total under construction (UC) capacity with PPA to 5GW (out of 12.5GW). State discoms are in the process of floating PPAs.
“As a result, we expect new tenders from state discoms to improve the outlook of the upcoming untied capacity. In Q1, it had also placed an additional 4.8GW turbine order, signalling its plans for new capacity addition beyond 31GW. Retain BUY with revised target price of Rs 669 (earlier Rs 610),” it said.