Target: ₹1,318
CMP: ₹1,009.65
Adani Energy Solutions Limited (AESL) is operating a mix of regulated and unregulated businesses. It has transitioned from operating regulated transmission assets to becoming a leader in competitively built transmission and from operating regulated distribution assets to emerging as a leader in smart meter assets. It has tapped into unregulated businesses and scaled up emerging new opportunities.
Earnings growth may be driven by: New transmission opportunities, growth in Mumbai DISCOM, existing smart meter wins and new opportunities.
We estimate EBITDA to grow at 32 per cent CAGR between FY24-FY27 due to about ₹3,000 crore from new transmission bids, ₹4,000 crore from smart meter, and ₹500 crore from distribution areas. On the back of implementation of new projects won from transmission and smart meter, EBITDA is estimated to grow to ₹13,200 crore in FY27 from ₹5,700 crore in FY24.
The stock is trading at 12xEV/EBITDA which we believe is comfortable given the strong growth in operating profits.
We initiated coverage with Buy with SoTP-based TP of ₹1,318.
Key risks are: lower projects awarded than expectation; high competitive intensity; counterparty risk; and Implementation risk: