Adani Energy Solutions Limited (AESL) is an attractive player in the rapidly expanding energy markets in India, and it offers growth unlike any other publicly traded utility or energy company across the US, Europe, or Asia, asserted investment solutions provider Cantor.

AESL has a diversified portfolio that includes transmission assets, distribution assets, and a smart metering business, with an enterprise value of $18.5 billion.

Cantor in a report forecast that the Adani Group company's total revenue will grow at a CAGR of 20 per cent from 2023-24 to 2026-27 and its adjusted EBITDA will grow at a CAGR of 28.8 per cent. In comparison, the revenue of peers is predicted to only grow at low single digits and EBITDA at mid-single digits.

"Yes, AESL is more expensive on a multiple basis, but it is also growing meaningfully faster than its peers. Secondly, we believe AESL is a more diversified business. We expect its transmission business will see strong growth as it completes the nine projects it has recently been awarded over the next 18-24 months (and we expect it to win more contracts over the coming years)," the Cantor report asserted.

While Cantor sees robust growth over the next four years, it also believes AESL will continue to outgrow peers over the next decade.

"This is a result of India being still underdeveloped relative to more mature markets, and as it develops and uses/needs more electricity, AESL's transmission and distribution businesses will stand to benefit," the Cantor report read.

Following a recent capital raise, AESL is now well-funded to drive growth across all three major segments, it added.

Cantor said AESL’s distribution business should be able to grow at double-digit rates as it continues to add to its regulatory asset base (RAB). Its smart metering business is just about to start generating meaningful revenue/profits as it works through its 22.8 million smart meter backlog (to generate $3.2 billion of income), and it could win another $40 million smart meters (which will add another$6 billion plus of income).

In fiscal year 2023-24, the company's transmission business accounted for 28.4 per cent of revenue and 52.6 per cent of EBITDA, while its distribution business accounted for 71.6 per cent of revenue and 36.3 per cent of EBITDA.

Its revenue has grown from $1.18 billion in 2020-21 to $1.98 billion in 2023-24 and its EBITDA has grown from $603 million in 2020-21 to$753 million in 2023-24.

"As more electricity is generated from renewables, infrastructure to transmit and distribute that electricity will only become more important, and that is entirely where AESL lies," the report noted. India is a country that needs more electrical infrastructure, and AESL is uniquely positioned to benefit from this trend.

Against this backdrop, brokerage house Cantor has initiated coverage on AESL with an 'Overweight' rating.

At the time of filing this report, the shares of AESL were trading at ₹1,013.20, up 3.49 per cent.

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