Elara Capital, a domestic brokerage firm, has commenced coverage on Adani Power Ltd., emphasizing the critical role thermal power will continue to play in India's energy security for the foreseeable future. This outlook underpins the company's robust long-term growth prospects, with Elara assigning an 'accumulate' rating and a target price of Rs 220 for the stock.
A key factor in Elara's assessment is Adani Power's substantial 24-gigawatt (GW) locked-in expansion pipeline, which is set to boost its operational capacity from 18.3 GW to an impressive 42 GW. The brokerage noted that approximately 60% of this pipeline involves brownfield projects, which are expected to accelerate execution timelines and reduce overall project costs. Furthermore, 55% of the planned expansion, equating to 13.3 GW, is already secured by long-term power purchase agreements (PPAs).
Thermal Power: Backbone of India's Grid
Elara Capital underscored thermal generation's foundational importance to India's power infrastructure. It provides essential baseload supply, effectively mitigates the intermittency of renewable energy sources, and ensures grid stability. As India's renewable energy penetration increases, complementary investments in battery energy storage systems and pumped hydro storage will become necessary. Transmission challenges and growing grid-balancing demands further reinforce the ongoing need for reliable, firm power.
Against this backdrop, coal-based capacity remains vital for India's energy security. The nation aims to add approximately 80 GW of coal-based capacity by fiscal year 2032.
Adani Power's Strategic Growth and Performance
As India's largest private thermal power generator, Adani Power currently operates 18.3 GW across 13 assets, primarily utilizing advanced supercritical and ultra-supercritical plant technologies. The company has also demonstrated a successful acquisition-led turnaround strategy, revitalizing stressed or underutilized assets such as Udupi Power, Coastal Energen, and Lanco Amarkantak.
While the remaining uncontracted expansion capacity offers potential for merchant power upside, and the company continues to bid for new thermal power opportunities, Elara observed that the stock has surged 27% year-on-year, outperforming the BSE Utilities Index. A significant portion of its medium-term growth potential may already be factored into its current valuation. Despite a recent fall of over 26% from its 52-week high of Rs 254.15 in May 2026, the stock has delivered remarkable multibagger returns, climbing 750% over the past five years.
Q2 Previews and Brokerage Targets
For the second quarter, JM Financial anticipates Adani Power's generation to grow 21% year-on-year, driven by capacity expansion and robust demand. They project a 29% year-on-year rise in revenue, with EBITDA increasing by 20% and profit by 13%. However, sequential earnings and margins may face pressure.
Motilal Oswal forecasts a 22% year-on-year revenue increase, attributing it to higher generation volumes partially offset by a 25% decline in merchant volumes as open capacity shifts to medium-term contracts. They estimate EBITDA at Rs 5,650 crore, with a 57% EBITDA margin, and expect profit after tax (PAT) to rise 6% year-on-year and 35% quarter-on-quarter.
Beyond Elara's 'accumulate' rating and Rs 220 target, other brokerages also hold positive views. Motilal Oswal and PL Capital both have 'buy' ratings with targets of Rs 250 and Rs 259, respectively. Bernstein has an 'outperform' rating with a Rs 220 target, while Morgan Stanley and Jefferies maintain positive views with targets of Rs 270 each. Antique Stock Broking has set the highest target at Rs 282.