Adani Power: Morgan Stanley raises target to ₹185

What changed in Morgan Stanley’s view

Morgan Stanley reiterated its ‘Overweight’ rating on Adani Power Ltd (APL) and raised its base case target price to ₹185 per share from ₹163.60 after the company’s Q2 performance and recent PPA wins. The brokerage linked the upgrade to improved earnings visibility, a stronger contracted portfolio, and a balance sheet that it sees as supportive for capital expenditure.

In a separate note, Morgan Stanley also referenced a higher target revision to ₹275 from ₹173, describing the Adani Group’s utility incremental businesses as lower-risk and more return-accretive, with faster growth versus history and peers. Across its commentary, the common thread was a preference for contracted, spread-led cash flows over merchant-linked volatility.

The central thesis: a shift toward annuity-like PPAs

Morgan Stanley said APL is moving away from a model driven by plant load factor on PPAs with merchant upside to one based on annuity returns on PPAs with stronger spreads. It added that the portfolio is shifting toward annuity-like returns under power purchase agreements, with stronger spreads and a smaller merchant exposure.

The brokerage argued that the transition is supported by APL’s execution record, leverage position, and lower equipment costs from pre-orders. It also said it has lowered its estimate of merchant capacity exposure, reflecting stronger earnings visibility.

Under-construction capacity and EBITDA assumption

A key plank of the report is APL’s under-construction pipeline. Morgan Stanley said most of APL’s 24 GW under-construction capacity should generate annuity returns, with EBITDA of ₹3.5 per kWh and fuel pass-through.

This framework matters because it anchors the brokerage’s earnings visibility argument to contracted economics rather than market-linked realizations. Morgan Stanley’s language suggests it expects the incremental capacity to be largely tied to long-term PPAs.

Capex cost advantage from pre-orders

Morgan Stanley said APL’s pre-ordered equipment from BHEL and L&T has, in hindsight, left it with capex costs 10-30 percent lower than peers. It pegged capex at ₹10 crore per MW, and said this provides flexibility in bidding for upcoming 14 GW PPAs across Uttar Pradesh, Rajasthan, Uttarakhand, West Bengal and Gujarat.

The brokerage framed this as a competitive advantage in a bidding environment, because lower equipment costs can improve project returns and bidding headroom without relying on aggressive assumptions.

PPA wins and the bid pipeline

Separately, Morgan Stanley said Adani Power has won PPAs and letters of award for about 6.7 GW over the past three months. It said this takes the PPA bid pipeline to around 22 GW.

Morgan Stanley reiterated that earnings visibility remains strong and, on that basis, it forecast an EBITDA CAGR of 20% over FY25–33, describing it as higher than its earlier estimate.

Growth and market share expectations through FY32

Morgan Stanley described Adani Power as India’s largest Independent Power Producer (IPP) and second-largest thermal developer after NTPC. It said the company has a market share of 8 percent in both coal capacity and generation.

The brokerage expects APL to be a major beneficiary of thermal capacity additions and sees market share reaching 15 percent by FY32. It linked that view to a 41.9 GW portfolio by FY32, described as 2.5 times FY25 levels, and said gross block is seen rising about 2.5 times by FY32e.

Valuation: premium multiple for lower-risk PPAs

Morgan Stanley said it now values the stock at 14 times FY32e EV/EBITDA, above Indian and global peers at 12 times. It attributed the premium to a lower-risk PPA profile, stronger growth, and improving RoCE.

While it noted that revenue, EBITDA and PAT were a miss versus its estimates, it said operational performance was largely in line and adjusted PAT beat on lower interest and tax.

Market context and stock move

Morgan Stanley said APL and other coal-based Indian peers have outperformed the Nifty by about 40 percentage points since April, helped by the Middle East conflict and positive developments around the resolution of US legal matters for the broader group.

The report also noted a sharp stock move: shares of Adani Power surged 9% to ₹687 on the NSE on September 19, as analysts pointed to catalysts that included Morgan Stanley’s stance and the company’s capacity expansion plan from 18.15 GW to 41.9 GW by FY32.

FY27 triggers Morgan Stanley is watching

In its broader trigger list for FY27, Morgan Stanley cited the commissioning of the Navi Mumbai International Airport, progress on the Ganga Expressway project, a ramp-up in its copper business, and continued expansion in new energy ventures. These triggers were presented as key milestones the brokerage is tracking over FY27.

Key data points from the Morgan Stanley notes

Market impact

The core market impact highlighted by Morgan Stanley is a reduction in perceived earnings risk as APL’s mix shifts toward PPAs and away from merchant exposure. The brokerage explicitly said it has lowered its estimate of merchant capacity exposure and tied its higher target to improved visibility from recent PPA wins.

It also pointed to sector tailwinds for coal-based generators, noting coal’s role in energy security and evening peak demand, and said coal-based Indian peers have outperformed the Nifty by about 40 percentage points since April.

Analysis: why the PPA mix and cost base matter

Morgan Stanley’s thesis rests on two measurable levers mentioned in its notes: contract coverage and cost discipline. The firm sees most of the 24 GW under construction generating annuity returns, and it is assigning a valuation premium to that perceived reduction in volatility.

The second lever is capex positioning. By citing ₹10 crore per MW and a 10-30 percent capex advantage due to pre-orders from BHEL and L&T, the brokerage is effectively arguing APL can bid more competitively for the referenced 14 GW of upcoming PPAs without diluting returns.

Conclusion

Morgan Stanley’s updated view on Adani Power combines a higher target price with a clearer emphasis on contracted earnings, a growing PPA pipeline, and a cost base it views as advantaged due to earlier equipment orders. The brokerage is also linking the story to a broader thermal capacity addition cycle, with APL’s portfolio seen expanding to 41.9 GW by FY32.

The next milestones to watch, based on the brokerage’s own framing, include further conversion of the ~22 GW PPA bid pipeline, progress on under-construction capacity, and execution against the company’s stated expansion trajectory.