Adani Energy Solutions (AESL) has had some ups and downs in 2024. Despite the stock being down more than 6% year-to-date, there is a silver lining.
Brokerage firm Cantor has spotted a green flag, which initiates an ‘overweight’ proposal with a target price of ₹2,251. This indicates a possible growth of 130% from its current market price of ₹979. It is such an exicitng news, so we are going to more about it in detail. Let’s get started:
Growth Options
AESL is not only any company; it has a diversified portfolio that has distribution assets, transmission assets, and a smart metering business. With an industry value of approximately $18.5 billion, AESL is well-positioned in India’s growing energy market.
Cantor is hopeful and predicts AESL’s total revenue to grow at a compound annual growth rate (CAGR) of 20% from FY24 to FY27, with modified EBITDA predicted to expand at a CAGR of 28.8%. On the other hand, its peers are launched to grow earnings in the low single digits and EBITDA in the mid-single digits.
Stock Performance
The stock has shown some stability, growing as much as 3.6% to an intra-day high of ₹1,019.60. It is now about 24% below its peak of ₹1,347.90, hit last month, but has rallied more than 48% from its 52-week low of ₹686.90, recorded in October last year. It has been a rough idea, but a strong comeback is possible.
Diversified Business Model
AESL’s business structure is predicted to drive strong growth. The news segment is set to benefit from the completion of nine awarded projects within the next 18-24 months, with additional contract wins expected.
The distribution business is projected to increase at near double-digit rates, and the smart metering division is balanced to start causing significant revenue from its backlog of 22.8 million smart meters.
Key Investment Considerations
AESL is the largest private-sector power information and distribution business in India. Its capability to supply power to major areas like Mumbai and the Mundra SEZ positions it well for growth. Also, smart meters convey an effective locked-in demand, with a government target of deploying 250 million smart meters by 2030.
Competitive Valuation
Cantor compared AESL to peers in developed markets, which tells that whereas these peers are predicted to grow revenue at a CAGR of 3.1% and EBITDA at 10.8%, AESL’s growth possible warrants a premium. Currently trading at a 60% discount on a growth-adjusted basis, AESL deserves a higher valuation multiple given its growth options.
Risks and Challenges
Despite its stability, AESL faces possible risks, including political changes that may impact private sector development and competition for new contracts. Some challenges include the incapability to secure other smart meter contracts and foreign exchange risks related to USD-denominated debt.
Conclusion
While Adani Energy Solutions has experienced volatility, its diversified operations and strong growth possibilities make it a clear investment opportunity. Cantor’s ‘overweight’ recommendation and the considerable growth show the confidence in AESL’s future performance. Investors should, however, should be mindful of the associated risks and challenges.
To learn in detail, click here.
Disclaimer
The information provided is based on stock market analysis and forecasts from credible sources. It should not be construed as financial advice. Investors are encouraged to conduct their own research or consult with a certified financial advisor before making investment decisions related to Adani Energy Solutions.
