Broker’s call: Adani Power (Accumulate)

Thermal power is the foundation of India's dependable base load electricity supply. Renewable energy sources, while becoming more prevalent, are still subject to weather conditions that impact their output. This necessitates complementary investments in battery energy storage systems and pumped storage solutions. Adani Power is the nation's leading private thermal power producer, with an operating capacity of 18.3 GW across 13 facilities, primarily consisting of high-efficiency supercritical and ultra-supercritical thermal plants.

The company is also planning one of the largest capacity expansions in the sector, with 24 GW of locked-in capacity that would raise its portfolio target to 42 GW. Approximately 60% of this pipeline is made up of existing plants, which allows for quicker implementation and lower project costs. With an Accumulate rating and a target price of ₹220 based on 12 times FY29E EV/EBITDA, Adani Power is the subject of our initial recommendation.

The company's strong earnings visibility is bolstered by its 24 GW locked-in capacity expansion, increasing PPA coverage, and potential for growth through merchant power ventures. However, Adani Power's stock has already surged by 27% year-over-year in the past year, surpassing the performance of the BSE Utilities Index. We believe that a substantial portion of the company's medium-term growth potential is already embedded in the current valuation.