Adani Power Limited – Stock analysis, Adani Power Limited – Fundamental analysis, Adani Power Limited – Is it a buy?
Business model
Adani Power Limited is the largest private sector thermal power producer in India ( It has one small solar power plant of 40MW as well). Its inception dates back to 2006 when it embarked on the ambitious endeavor of establishing its first power plant in Mundra, Gujarat. Currently, the company accounts for a substantial power generation capacity of 15250MW.
Adani Power Limited operates its thermal power plants across multiple states in India, including Gujarat, Maharashtra, Karnataka, Rajasthan, Chhattisgarh, Jharkhand and Madhya Pradesh. The company’s solar power unit is situated in Gujarat.
The Company received carbon credits as the world’s first coal-based thermal power project recognized by the United Nations Framework Convention on Climate Change (UNFCCC). It pioneered the construction of a coal-based supercritical thermal power project under the Clean Development Mechanism of the Kyoto Protocol.
The company was the first to deploy the cutting-edge supercritical technology in India and among the first to use state-of-the-art technology in the recently constructed 1,600MW ultra-supercritical thermal
power project (USTCPP) in Godda, Jharkhand.
Why thermal power plants when every other company is focusing on Green energy
In the second picture, coal based power demand will keep on increasing, although it’s share will decrease in total energy mix.
The reason for thermal power contributing a high share of power generation in the total energy mix is its inherent advantage of high levels of capacity utilization, stemming from ready fuel availability from
domestic sources. In contrast, renewable energy sources like solar and wind power suffer from
intermittency and lower capacity utilization. This makes thermal power ideal to supply base load power and support renewable power generation.
Capacity breakdown
Key Fundamental Ratios
MARKET CAP : ₹ 2,07,831 Cr.
CMP : ₹ 539
PE : 10.1
ROCE : 15.8 %
ROE : 44.8 %
Return over 1year : 72 %
Industry P/E : 25.5
In last one quarter
Promoter holding decreased from 74.97% to 70.02%
FII: Increased holding from 11.95% to 17.51%
DII: Increased holding from 0.04% to 0.76%
Financial performance
Nov 2023 concall highlights
Adani Power achieved exceptional financial performance in Q2FY24, with remarkable growth in volumes, revenues, and profits.
In Q2FY24, the company achieved a strong all-round growth in recurring revenues, EBITDA, and profit before tax.
The company has reduced its leverage significantly and improved its balance sheet health.
Power Market and Economy
The Indian power market and the broader economy have been on a robust growth trajectory.
Power demand is projected to grow at a similar rate over the next few years.
Operational Updates
The recently commissioned Godda power plant has achieved operational stability and high levels of availability.
The Mahan power plant has been successfully turned around.
Future Plans and Expansion
Adani Power plans to add 6,000 MW of thermal capacity in addition to its existing capacity of 15,000 MW.
The company is evaluating inorganic opportunities and has a track record of successfully turning around stressed assets.
Revenue Visibility and Fuel Security
Adani Power has a high degree of revenue visibility through long-term capacity tie-ups.
The company also has fuel security through domestic coal tie-ups.
ESG and Rating Improvement
The company has maintained its leadership in ESG matters and achieved higher scores than its global peer group average.
Adani Power has received encouraging scores in various ESG rankings, surpassing its national peer set and international sectoral average.
The company has a strong case for rating improvement.
Tax and CAPEX
Adani Power has carry forward losses that will provide a shield for some time, but it may come in the tax bracket thereafter.
The company has already placed the order for FGD and expects large CAPEX to come in FY26-27.
Market Strategy
Adani Power has a two-pronged strategy for its open capacity, deploying it in the merchant and short-term markets and renewing contracts as needed.
The company is fully secured in supplying power to Bangladesh through a legally binding PPA backed by a sovereign guarantee.
Conclusion
Adani Power Limited is majorly involved in thermal power energy only and coal based power demand will keep on increasing, although it’s share will decrease in total energy mix.
Recent increase in revenue and share price is because of multiple projects that became operational and started generating revenue like Godda power plant
APL’s Mahan project of 1600MW will probably be operational with in this financial year which may add to the revenue of the company
After this, large capex will happen in FY26-27 only and company has a plan to add 6,000 MW of thermal capacity in addition to its existing capacity of 15,000 MW. In addition to this, company keeps eye on inorganic opportunities and has successful track record of that. But IMO, those things take time i.e. to buy some company and then to turn that into profitable one and moreover company has deferred taxes, which they will have to pay eventually and it will lower down the earning
So, Company’s revenue may increase in next 1-2 quarters because of Mahan project but after that there does not seem to be any trigger point in near term which can further increase revenue other than increase in power tariffs ( Recent news from Rajasthan) and increase in PE which may or may not happen. So, it is good for long term investors or for short term like 1-2 quarters.
Disclosure: My buy price is Rs. 281 and I will hold it for 1-2 quarters and will take decision after that.
Note: I am not SEBI registered person. Above views are my personal views only and is not a buy/sell recommendation. It is only for education purpose. Please contact your financial advisor before taking your financial decisions.