Adani Power Target Price at ₹187: Brokerages Bullish on Expansion

Introduction: Analyst Confidence in Adani Power

Several prominent brokerage firms have expressed a bullish outlook on Adani Power Ltd., setting a target price as high as ₹187 per share, which suggests a potential upside of nearly 30% from its current trading levels. This optimism, led by firms like ICICI Securities and Antique Stock Broking, is rooted in the company's aggressive capacity expansion strategy and its success in securing long-term Power Purchase Agreements (PPAs). Despite a recent dip in quarterly profits, analysts believe the company is well-positioned to capitalize on India's growing energy demand, transitioning from a stressed asset operator to one of the country's most efficient private baseload power generators.

Brokerage Outlook: A Deep Dive into the 'Buy' Rating

Antique Stock Broking initiated its coverage with a 'Buy' rating, projecting that Adani Power is on a sustained earnings upcycle. The firm's ₹187 target price is based on a valuation of 15 times its estimated FY28 EV/EBITDA. The core of this thesis is the company's massive expansion plan and its dominant position in recent state-led PPA tenders. Similarly, ICICI Securities revised its target price upwards from ₹134 to ₹187, citing the company's move to double its under-construction capacity and secure contracts at attractive tariffs. These reports highlight that new PPAs carry higher fixed charges, ranging from ₹2.9 to ₹4.3 per unit, which significantly improves cash-flow certainty compared to legacy contracts.

Strategic Expansion: Powering Future Growth

Adani Power has laid out an ambitious plan to more than double its operational capacity from 18.15 GW in FY25 to 41.9 GW by FY33. A significant portion of this 23.7 GW expansion is under construction and focuses on brownfield projects. This approach is strategically sound as it helps reduce capital costs to approximately ₹8 crore per MW and shortens project execution timelines to around 3.5 years. The company's ability to place orders for critical equipment ahead of its peers gives it a competitive edge in this capital-intensive industry. This expansion is timed to meet the projected 6% compound annual growth rate (CAGR) in India's electricity demand through FY32.

Recent Financial Performance

While the long-term outlook is positive, Adani Power's recent quarterly results reflect some near-term pressures. For the third quarter of FY26, the company reported a consolidated net profit of ₹2,480 crore, an 18.9% decline from the previous year. Revenue from operations also fell by 8.9% to ₹12,451 crore. The company attributed this dip to a reduction in one-time prior period income and softer merchant power tariffs. Similarly, the second quarter saw a 12% decline in net profit to ₹2,906 crore. However, power sale volumes have remained resilient, growing 7% year-over-year to 24 billion units in Q2, indicating stable underlying demand for its generated power.

Dominance in Power Purchase Agreements

A key factor strengthening earnings visibility for Adani Power is its success in securing long-term PPAs. The company has captured about 70% of the capacity awarded in the recent state-led thermal procurement cycle, amounting to 12.4 GW out of 17.7 GW. With approximately 67% of its total projected 41.9 GW portfolio already tied up under PPAs or letters of intent, the company has significantly de-risked its future revenue streams from the volatility of the merchant market. These agreements, combined with SHAKTI-linked fuel supply arrangements and captive coal mines, enhance both dispatch competitiveness and financial stability.

Key Financial Metrics and Valuation

Adani Power's valuation presents a mixed but compelling picture for investors. The stock trades at a Price-to-Earnings (P/E) ratio of around 22.5x, which is higher than some peers but is supported by a strong growth outlook. Its Return on Equity (ROE) stands at a healthy 24.27% for FY25.

India's Power Sector Context

The Indian power sector is poised for significant investment, driven by rising demand from industrial activity, electric vehicles, and data centers. The government projects peak power demand to reach 388 GW by 2032. While the push for renewable energy is strong, thermal power remains critical for ensuring baseload energy security, especially to meet evening peak demand. As India's largest private independent power producer, Adani Power is strategically positioned to fill this gap, with analysts forecasting its market share in coal capacity could reach 15% by FY32.

Risks and Forward Outlook

Investors should remain mindful of potential risks, including delays in project execution, volatility in merchant power prices, and fluctuations in coal supply and costs. However, the company's proactive measures, such as securing long-term fuel supplies and deleveraging its balance sheet, help mitigate these challenges. Brokerages project that Adani Power's revenue, EBITDA, and profit after tax will grow at a CAGR of 16%, 19%, and 17%, respectively, over the FY25–32 period. The company's ability to fund a large portion of its capital expenditure through internal accruals is expected to keep its debt levels manageable.

Conclusion

Adani Power stands at a pivotal moment, leveraging its strengthened financial position and operational expertise to embark on a major expansion phase. The strong endorsement from brokerage firms, backed by a clear strategy centered on capacity growth and secured long-term contracts, paints a compelling long-term growth story. While short-term earnings may face headwinds, the company's strategic initiatives position it to be a primary beneficiary of India's enduring need for reliable thermal power.