Adani Energy Solutions Target Price:Adani Group’s energy stock Adani Energy Solutions may have been under pressure for the past few days, but it can once again prove to be a multibagger for investors in the future. The brokerage house has given a target price of more than double the current price on this stock. The brokerage house says that several projects going on on the transmission front will help in increasing the operational revenue from Rs 4045 crore in FY24 to Rs 7000 crore in FY27. Smart metering, cooling solutions and distribution business are also growth factors. Currently, brokerage house Cantor Fitzgerald has given an Overweight rating to the stock of Adani Energy Solutions and has given a high target price of Rs 2251. The current price of the stock is Rs 1022, in view of which it is expected to give a return of 120 percent.
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Target for 120% growth in share
The brokerage house believes that using the relative valuation approach is most appropriate for AESL. The brokerage says that we have prepared a list of piers in the US, Europe and Asia, which we use to compare with AESL. These piers are estimated by FactSet to grow revenue at 3.1% CAGR in CY23-CY25E and EBITDA at 10.8% CAGR during CY23-CY25E. The brokerage has argued that the piers are operating in more developed and slower growing markets compared to AESL and India. These piers are trading at an average CY25/FY26E EV/EBITDA multiple of 10.9x compared to AESL, while AESL is trading at 12.8x (on our estimate).
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The brokerage believes AESL should trade at a higher premium given its superior revenue and profitability growth. On a growth adjusted multiple (FY26 EV/EBITDA/Growth), the peers are trading at 1.0x. Using a 1.0x growth adjusted multiple, this means the FY26 EV/EBITDA multiple for AESL is 33.0x. We apply a 20 per cent discount on this multiple, resulting in a target price of Rs 2251 based on a 26.5x FY2026 EV/EBITDA multiple, the brokerage says.
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Growth will come due to these factors
Transmission :On this front, AESL is working on 9 additional projects which are expected to be completed in the next 18-24 months. These projects will help grow operational revenue from Rs 4045 crore in FY24 to Rs 7000 crore in FY27, showing a CAGR of 20.7%.
Distribution :AESL’s profitability is based on its regulatory asset base (RAB), which stood at Rs 8485 crore as of 1Q25. The company is expecting to add Rs 1000 crore to its RAB. The targeted return for Hi-Teens on additional RAB addition is 20%.
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Smart Metering :The Indian government has mandated that 250 million homes have smart meters by 2025/2026. The aim is to help the government reduce energy losses by providing utilities with information about peak consumer demand and consumption patterns.
Cooling Solution:Although this business is not generating any revenue, it is worth noting the company’s ambitions of implementing district cooling solutions.
(Disclaimer: The views or advice on the stock are given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)
