The US-based firm Cantor Fitzgerald has begun coverage of Adani Energy Solutions Ltd (AESL), giving it an ‘Overweight’ rating and setting a target price of Rs 2,251, indicating a potential 130 per cent increase from Thursday’s closing price.
Cantor Fitzgerald noted that Adani Energy Solutions is trading at a 60 per cent discount to its peers on a growth-adjusted basis and suggested it should be valued at least in line with, if not higher than, its competitors.
AESL’s shares rose by 1.77 per cent to Rs 996.75 on Friday.
Transmission, distribution, and smart metering industries are all part of Adani Energy Solutions’ diverse portfolio. Cantor believes AESL, with an enterprise value of $18.5 billion, is a compelling option to participate in India’s fast-growing energy markets.
Cantor stated that AESL provides growth unmatched by any other energy or utility firm that is publicly traded in the US, Europe, or Asia.
“We forecast total revenue to grow at a CAGR of 20 per cent from FY24 to FY27E and adjusted EBITDA to grow at a CAGR of 28.8 per cent. This compares to peers growing revenue at low single digits and EBITDA at mid-single digits. Yes, AESL is more expensive on a multiple basis, but is also growing meaningfully faster than its peers,” it said in a statement.
In January, the financial services firm was the first broker to commence coverage of Adani Enterprises Ltd., with a target price of Rs. 4,368. The Adani Enterprises scrip traded at Rs 3,017.85 on Friday.
AESL, according to Cantor, is a more diverse business. The Adani Group company is projected to complete the nine projects it was just given over the course of the next 18 to 24 months, driving significant development in the transmission business.
AESL is also expected to expand its regulatory asset base (RAB) and start making significant profits from its smart metering business in the near future, which should allow the distribution company to grow at double-digit rates.
Cantor stated that Adani Energy Solutions plans to address its backlog of 22.8 million smart meters, which is expected to generate $3.2 billion in revenue. Additionally, the company could secure another 40 million smart meters, potentially adding over $6 billion to its income.
“While we see robust growth over the next four years, we believe AESL will continue to outgrow peers for at least 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,” it further added.
Following a recent capital raise, Adani Energy Solutions has become well-funded to drive expansion across all three major categories, it said.
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