Adani Green Shares: Emkay Calls Valuation Attractive, Sees 54% Upside Potential

Shares of Adani Green Energy Ltd fell nearly 7 percent in the trading session on Monday following the latest round of allegations by Hindenburg Research. However, domestic brokerage firm Emkay Global Financial Services launched coverage of the Adani Group stock on Friday, citing a strong rally of over 50 percent in the stock.

In its latest report, Hindenburg Research has accused SEBI Chairwoman Madhabi Puri Buch and her husband Dhaval Buch of having links with an offshore fund linked to the Adani group. The US short seller said SEBI has been ordered to investigate the mutual funds linked to the Adani case.

Adani Green Energy’s (AGEL) overall renewable energy (RE) operational capacity growth rate has been 41 per cent in the last 5 years. The company has well-secured locations for solar-wind development of over 50 GW in Gujarat and Rajasthan and another 5 GW for PSP with evacuation visibility. The momentum will now be concentrated in superlocations of Gujarat and Rajasthan, said an IC Emkay report.

“The resource efficiency in these states is among the highest in the world, with 2,060 kWh/m2 of solar radiation and wind speed of 8 mtr/sec, which translates to 33 percent solar and over 35 percent wind. We believe AGEL’s RE market share should increase to 15 percent by FY30E from 8 percent in FY2024, and commercial capacity should increase to 20 percent from 5-6 percent,” the statement said.

Before the rebound, shares of Adani Green Energy fell 6.96 per cent to Rs 1,656.05 in Monday’s trading session, taking its total market capitalisation to Rs 2.62 lakh crore. The security had settled at Rs 1,780.10 in the previous trading session on Monday.

AGEL has a diversified capital base, with USD 3.4 billion of renewable assets from banks along with access to cheaper long-term global bond markets for the operational phase. After Rs 7,000 crore of remaining promoter infusion, future growth will be provided through internal accruals, the Emkay report added.

“AGEL’s consolidated net debt increased to Rs 53,900 crore in FY24 from Rs 9,200 crore in FY18, but leverage ratios peaked in FY22 with net debt to EBITDA standing at 7.4 times at the end of FY24. It should come down to 3.6 times by FY2030E, despite an increase in net debt to Rs 1.86 lakh crore on account of capex of Rs 2.36 lakh crore. We expect AGEL’s cost of debt to gradually come down,” Emkay said.

Adani Green Energy reported a 38 per cent year-on-year (YoY) growth in consolidated net profit at Rs 446 crore for the first quarter ended June 2024. Revenue from operations during the period under review grew 31 per cent YoY to Rs 2,834 crore. Revenue from power supply grew 24 per cent YoY to Rs 2,528 crore, while EBITDA from the segment grew 23 per cent YoY to Rs 2,374 crore.

Emkay Global sees the valuation of Adani Green stock as attractive. “We value AGEL at 15 times FY30E EV/Ebitda discounted by 12 per cent (CoE) till Sep 25, which is quite conservative and supported by 30-60 per cent revenue-earnings CAGR,” it added with a ‘buy’ rating and a target price of Rs 2,550, suggesting an upside of 54 per cent from the intraday low.