Adani Power shares may rally 18%, positioned as a pure play in India’s thermal power space: InCred Equities

Synopsis

InCred Equities has initiated coverage on Adani Power with an ‘add’ rating and a target price of Rs 649, citing a potential 17.8% upside. The brokerage highlights APL’s strong thermal power presence, stable PPAs, brownfield expansion plans, and deleveraging efforts. With capacity set to rise to 30.67 GW by FY30F, APL is well-positioned for growth.

Calling it a pure play on the Indian thermal space, domestic brokerage firm InCred Equities has initiated coverage on Adani Power Ltd (APL) with an ‘add’ rating and set a target price of Rs 649 per share, implying an upside potential of 17.8% from its previous closing price.

The brokerage’s outlook is based on the company’s strong presence in the thermal power segment, brownfield expansion strategy, and deleveraging progress.

According to InCred, Adani Power is a pure play in India’s thermal power space with 87% of its capacity tied to long-term power purchase agreements (PPAs) that include a fuel cost pass-through mechanism.

The company generated Rs 200 billion of recurring EBITDA in FY25, supported by this stable revenue mix. The remaining 17% of capacity is dedicated to merchant power, leveraging Indian Energy Exchange (IEX) prices with a realised average of Rs 5–6/kWh and a peak of Rs 10/kWh.

Adani Power currently operates 17.55 GW of capacity and has outlined an expansion strategy to scale its installed capacity to 30.67 GW by FY30F. This includes a planned addition of 13.12 GW through brownfield projects such as Mahan Phase II (1.66 GW), Raipur Phase II (1.66 GW), Korba Revival (1.32 GW), and others.

InCred noted that this growth strategy aligns with India's projected 5–6% annual power demand growth, with peak demand expected to reach 458 GW by FY32F.

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The domestic brokerage firm also highlighted that the company achieved a 71% plant load factor (PLF) in FY25 and generated Rs 564 billion in revenue for the same period. APL’s inorganic growth strategy and expansion projects are expected to improve the industry PLF to 69% by FY30.

On the financial side, Adani Power is expected to report an 11% EBITDA CAGR over FY25–28F, primarily driven by increased PLF and higher power generation from the merchant segment. The company plans to spend Rs 1,200 billion in capital expenditure for FY25, funded via internal accruals, and aims to reduce its net-debt-to-EBITDA ratio to 0.9x by FY30F from 1.5x in FY25.

The brokerage notes potential downside risks related to execution delays in the 13.12 GW pipeline, lower-than-expected merchant realisation, and the timing of discom payment resolution.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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