Emkay launches coverage on Adani Green, predicts strong returns from RE
Emkay Global has initiated coverage on Adani Green Energy (AGEL) with a BUY rating, saying that improving capacity utilisation factor (CUF) would lead to a 35 percent compound annual growth rate (CAGR) in electricity sales.
The broker expects AGEL to deliver an operating Compound Annual Growth Rate (CAGR) for renewable energy (RE) of over 30 percent in FY24-30E, driven by its development strategy focused on the Khavda asset in Gujarat.
An increasing share of merchant, and commercial and industrial (C&I) volumes are expected to reach 20 percent by FY30, the report said. AGEL aims to expand its RE capacity to 56.5 gigawatts (GW) by FY30, increasing its market share from 8 percent to 15 percent and increasing merchant capacity from 5-6 percent to 20 percent, the analysts noted.
Risks that could affect AGEL’s growth, according to Emkay, include execution risks related to generation and transmission projects, potential delays and cost overruns. Regulatory and policy risks, inflationary pressure on equipment costs and uncertainties related to resources, such as solar radiation and wind speed, also pose challenges, the report said.
The competitive landscape for power purchase agreements (PPAs) could further complicate AGEL’s profitability as lower rates could make projects less economically viable, the report said.
AGEL has achieved a 41 percent CAGR in operational RE capacity over the past five years. The company has secured over 50 GW of solar and wind development sites in Gujarat and Rajasthan, with another 5 GW for pumped storage (PSP). The focus will now be on the high-yield super sites in Gujarat-Rajasthan, which have exceptional solar irradiance and wind speeds, the report said.
First publication: Aug 12, 2024 | 4:50 PM IST