Ventura
Post Hindenburg controversy, Adani Green Energy Limited (AGEL) experienced a significant decline of approximately 77% in its stock price. However, the stock has since rebounded strongly, gaining 288% and reaching a CMP of INR 1,890 per share. Taking advantage of the steep decline, marquee investors like GQG and IHC have shown confidence in the company by increasing their stakes. Promoters are reinforcing their commitment by injecting INR 9,350 crore through the issuance of warrants, with INR 2,338 crore already infused at INR 1,481 per share. Moreover, TotalEnergies has strengthened its strategic partnership with AGEL by investing USD 300 million in an AGEL subsidiary, acquiring a 50% stake in the projects. Our discussions with management indicate the company’s core growth plans remain largely intact, although there may have been some minor delays. AGEL’s strength lies in its robust business model, characterized by long-term PPAs with a 25-year fixed term. These agreements ensure a predictable cash flow stream, mitigating external factors.
With 2,848 MW of renewable capacity being added in FY24, the total operational renewable generation capacity has increased to 10,934 MW (largest in India). Looking ahead, AGEL’s ambitious plans to further scale up its capacity to 20 GW by FY26 and an even more substantial 45 GW (out of which Khavda will contribute 30GW) by 2030 demonstrate their confidence in capturing a significant share of the renewable energy market. This signifies a projected CAGR of 28% in AGEL’s capacity expansion over FY23-FY30.
We expect revenues to grow at a CAGR of 26.5% INR 1,9950 cr, EBITDA is expected to grow at CAGR 38.9% to INR 1, 8358 cr with 92% margins (+2870 bps) by FY27, while net earnings are expected to grow from INR to INR 4,262 cr (CAGR of 44.8%) with 17.8% margins (+610bps)
We initiate coverage on AGEL with a BUY for a price target of 2830(69.9x FY27 P/E) representing an upside of 49.7% from the CMP of INR 1890 over the next 24 months. While the current valuations may seem demanding, the high growth earnings trajectory should ensure that the valuations sustain. Key risks to our thesis:- Sharp slowdown in the global economy.