Adani Power Surges As Morgan Stanley Initiates Coverage With ‘Overweight’ Rating

Shares of Adani Power Ltd (APL) rose sharply in early trade on Friday after Morgan Stanley began coverage of the stock with an ‘Overweight’ rating and a price target of Rs 818, indicating a potential 29 per cent gain from Thursday’s close.

The brokerage stated, “Adani Power is a good illustration of turnaround in India’s corporate history, with resolution on most regulatory issues and multiple value-accretive acquisitions.”

“APL will deliver strong earnings growth driven by the timely completion of projects and more PPA wins in the medium term. Initiate at OW (Overweight) and Top Pick,” it further added.

Morgan Stanley also highlighted that new coal-based PPAs should bolster investor confidence in the company’s earnings strength.

The firm projected that Adani Power’s generation capacity could rise 2.5 times and EBITDA about three times by FY33.

The note stressed, “We believe coal holds the key to India’s energy security, with nuclear being a driver in the next decade. India is looking to add 80GW of coal by F32; there is currently a large power purchase agreement (PPA) pipeline of 20GW.”

Trading Performance and Market Position

During morning trade, the stock was up by nearly 7–8 per cent. On Thursday, APL had ended just 0.5 per cent higher.

Adani Power is the country’s largest private power producer and the second-largest overall after NTPC, holding an 8 per cent share in both coal capacity and total generation.

“We forecast its market share to reach 15 per cent by F32e with a 41.9GW portfolio (2.5x vs F25). APL has seen favourable resolution of most regulatory issues and has a strong balance sheet (F25 net debt/EBITDA: 1.5x). We expect 60-65 per cent of its US$27 billion capex for a 23.7GW addition to be met through internal accruals,” the brokerage asserted.

According to the note, steady execution of projects, supported by land acquisition, equipment orders, construction by the Adani Group and controlled debt levels, together with fresh PPAs, will underpin earnings growth.

“We see upside to our estimates if APL’s merchant portfolio declines from 20 per cent currently, and profitability in recently acquired 2.9GW power plants improves,” it added.

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