Adani Energy Solutions Shares Drop 50% from August 2024 High; Elara Securities Recommends Buy
Adani Energy Solutions Ltd (AESL) has witnessed a significant 50% decline in its share price since its August 2024 high. Despite this drop, Elara Securities has given the stock a ‘Buy’ rating, setting a target price of Rs 930, indicating a potential upside of 37% from its current levels.
Strong Growth Potential in Transmission
Elara Securities forecasts that AESL’s transmission EBITDA will likely double to Rs 7,600 crore by FY27.
- This growth is driven by India’s renewable energy (RE) target and AESL’s expected 20-25% market share in the upcoming Rs 84,000 crore transmission bid.
- AESL’s project pipeline worth Rs 54,800 crore further strengthens the company’s prospects.
Surge in Demand for Distribution
In terms of distribution, AESL expects significant demand growth in the Mundra SEZ, rising from 50 MW to 5 GW.
- This will increase the regulated asset base (RAB) to Rs 1,500-2,000 crore by FY27.
- AESL’s Mumbai operations will see annual capex of Rs 1,200-1,500 crore, boosting regulated equity to Rs 6,000 crore by FY27.
Smart Meter Dominance and EBITDA Margin
AESL also dominates the smart meter segment with a 17% market share, having installed 23 million meters.
- The company has maintained an impressive EBITDA margin of 85% in this segment.
- Elara noted that AESL will continue to generate significant revenue, with each meter contributing Rs 12,000 over the 90-month agreement term.
Recent Projects and Incremental EBITDA Growth
AESL has secured five new transmission projects valued at Rs 38,800 crore following its QIP in FY25.
- These projects are expected to increase EBITDA by Rs 7,000 crore, helping the company reach an EBITDA of Rs 7,600 crore by FY27.
Positive Outlook and Buy Rating
Given the strong growth in both transmission and distribution sectors, Elara Securities sees a compelling investment opportunity in AESL.
- With substantial growth in RAB, smart meter revenue, and a robust project pipeline, the brokerage’s SOTP-based target of Rs 930 reflects the potential upside from current levels.
In conclusion, Adani Energy Solutions is positioned for significant growth, driven by expanding transmission capabilities, increasing demand at Mundra, and dominance in the smart meter space. Elara Securities’ positive outlook highlights AESL as an attractive buy for long-term investors.
