Adani Power will gain momentum
International brokerage firm Morgan Stanley says that shares of Adani Power Limited can rise by 17% to Rs 185 per share. In view of the positive signals in the coming quarters, the company has maintained its overweight rating on this stock. Coal continues to be critical to energy security in India, especially to meet the increasing evening electricity demand. Adani Power Limited (APL) is India’s largest private power generating company and the second largest thermal power company after NTPC. At present it has about 8% market share in coal based capacity and production.
Morgan Stanley says that the company can benefit greatly from increasing thermal power capacity in the future. It is estimated that by the financial year 2032 its market share may increase to about 15%. The company has a project portfolio of 41.9 GW, which is 2.5 times more than in FY 2025. Apart from this, APL has also resolved most of its major regulatory issues, which has increased the opportunities for further growth.
The company has strengthened its contract business. It has signed power purchase agreements (PPA) for Bitubori and Pirpainti. Award letters have also been received for Raipur and Annupur. Now the company’s PPA bid pipeline has increased to around 22 GW, which was earlier 17 GW. The company has performed well in recent bids and is well positioned to win further PPAs due to its strong balance sheet and off-the-shelf equipment. Due to this, the company’s estimated capacity to sell electricity in the open market has been reduced from 9.6 GW to 7.6 GW, which is considered good for its earnings.
Benefit from PPA tariff
Recent PPA tariff of Rs 5.8-6.2 per unit and higher fixed charge of around Rs 4 per unit will help the company earn EBITDA of around Rs 3.5 per unit, which is higher than Rs 2.5 per unit earned by selling in the open market. This will strengthen both the company’s earnings and cash flow. APL’s 23.7 GW projects under construction are expected to cost around Rs 27,000 crore between financial years 2026 to 2032. The company can meet 60-65% of this expenditure from its earnings only. Its balance sheet is also strong, with a net debt-to-EBITDA ratio of just 1.5 times.
increased target price
Morgan Stanley has increased its target price by 13% to Rs 185. Earlier it was Rs 163.6. This reflects the good performance of the second quarter and increased earnings estimates due to the recent PPA and LOA. The company has increased its EPS estimates by 2% for FY 2026, 5% for FY 2027 and 3% for FY 2028. The brokerage firm says that now from the financial year 2025 to 2033, the company’s EBITDA can grow at the rate of about 20% every year, the earlier estimate was 16%. There has been no change in the method of valuation of the company.