Jefferies predicts a 33% increase for Adani Green, highlighting three significant factors driving the growth
In a recent analysis, investment bank Jefferies has shown optimism towards Adani Green, a renewable energy subsidiary of the Adani Group. The firm has estimated that Adani Green will see incremental utilization levels of 30% or more, rising from the current 24.8% in the financial year 2025.
Jefferies has also highlighted an equity investment of Rs 9,350 crore planned by the Adani Group for the renewable energy sector. The investment, partially made in 2024, with the balance infused in April-July, is expected to support the Group's ambitious plans to develop 30 GW of renewable energy capacity out of its target of 50 GW by 2030.
The development of this capacity is primarily focused on Khavda, a location that Jefferies believes has the best solar irradiation levels after Ladakh in India. Currently, Khavda's capacity stands at 5.6 GW, and Adani Green is aiming to expand this significantly.
However, the report also acknowledges certain risks for Adani Green, including execution delays, particularly at Khavda, and the final outcome from the ongoing US criminal investigation. Despite these challenges, Jefferies remains bullish on Adani Green, citing the fact that nearly 80%+ of Adani Green's installed capacity is tied up under 25-year long-term Power Purchase Agreements (PPAs). These PPAs provide steady earnings and cash flow visibility, lending confidence about the balance sheet improving.
Jefferies has a Buy recommendation on Adani Green with a target of Rs 1,300 per share. The price target values the company at 20x estimated EV/EBITDA for September 2027. It's worth noting that this valuation is at a premium to their 15x target multiple for JSW Energy.
The upside for the Adani Green share price, according to Jefferies, is nearly 33% from current levels. The firm also expects the net debt to EBITDA ratio for Adani Green to come in lower at 6.9x from the current 8.3x on Jefferies' capacity assumptions of 45 GW.
Investors are closely monitoring Adani Green stocks due to the scrutiny following allegations and attacks on the Adani Group by firms like Hindenburg Research. These concerns about the company's financial practices and market stability have raised eyebrows, but the long-term PPAs and the clean chit given by the Sebi offer some reassurance.
As of today, the Adani Group stocks, including Adani Green, are rallying between 2-10%, reflecting the market's positive response to the optimistic outlook for Adani Green.
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