Morgan Stanley has maintained its 'overweight' rating on Adani Power Ltd and has set a target price of ₹185 on the stock, implying an upside of around 17% from the current price. The firm says the company's growing thermal power capacity, strong power purchase agreement (PPA) pipeline and rising tariffs are likely to improve earnings and cash flow rapidly.
Adani Power Limited is currently India's largest private power generation company and ranks as the second largest thermal power producer after NTPC. At present the company's coal based power generation capacity and market share is around 8%. Morgan Stanley said that the company could benefit greatly due to thermal capacity addition in the coming time. It is estimated that the market share may reach 15% by FY 2032. The company currently has a project portfolio of 41.9 GW, which is 2.5 times higher than in FY2025. Also, Adani Power has resolved most of its regulatory issues, which will open new doors for growth in the future.
The company has strengthened its contract based business. New PPA agreements have been signed for Bitubori and Pirpainthi, while Letters of Award (LOA) have been received for Raipur and Annupur. Now the company's PPA bidding pipeline has reached 22 GW, up from 17 GW earlier. The company has performed well in recent bidding rounds and is in a favorable position to win more contracts due to its strong balance sheet and ready infrastructure. Due to these reforms, the power sale capacity of the company in the open market has reduced from 9.6 GW to 7.6 GW. Which is considered positive for the benefit of the company.
The latest PPA tariff ranges between Rs 5.8 to Rs 6.2 per unit, while the fixed charge is around Rs 4 per unit. Under this structure the company is likely to get an EBITDA of around ₹ 3.5 per unit, which is higher than the ₹ 2.5 per unit in the open market. Hence both earnings and cash flow of the company will be strengthened.
Adani Power's 23.7 GW of projects under construction is estimated to cost around ₹27,000 crore between FY26 and FY32. The company will be able to cover 60-65% of this from its own internal earnings. Currently the company's balance sheet is strong and the net debt-to-EBITDA ratio is just 1.5 times. Morgan Stanley revised its estimate and raised the target price to ₹185 from ₹163.6. The increase was driven by the company's strong second quarter results, as well as the recently awarded PPA and LOA agreements.
According to the brokerage firm, the company's EPS estimates have been raised by 2% for FY26, 5% for FY27, and 3% for FY28. It is now estimated that EBITDA will grow at an average growth rate of 20% per annum from FY25 to FY33, up from 16% earlier. Morgan Stanley did not change its valuation structure, but clarified that Adani Power is poised for strong growth over the next decade and its position in the energy sector will be strengthened.
Note: The information provided here is for informational purposes only, it is important to mention that investing in the market is subject to market risks. So always consult an expert before investing.
