InCred has initiated coverage on Adani Power Ltd. with an ‘add’ rating and a target price of Rs 649 per share.

Adani Power, India’s largest private thermal Independent Power Producer, has staged a turnaround, the brokerage noted.

The company currently operates a capacity of 17.55GW and aims to expand this by 75% to 30.67GW by FY30. This expansion aligns with India’s projected 5-6% annual power demand growth, targeting a peak demand of 458GW by FY32, it said.

Adani Power’s growth strategy includes adding 13.12GW through various projects such as Mahan Phase II, Raipur Phase II, and Korba Revival. Incred notes that Adani Power’s execution certainty is bolstered by equipment orders for 11.2GW from BHEL and cost efficiency through the acquisition of four coal mines, securing fuel for 3GW merchant capacity.

The brokerage projects an 11% Ebitda compound annual growth rate for APL over FY25-28, driven by a 70% uptick in Plant Load Factor and 10% power generation growth as new capacities come online.

The company’s balance mix, with 87% of capacity under long-term Power Purchase Agreements featuring a fuel cost pass-through clause, is expected to generate Rs 20,000 crore of recurring Ebitda in FY25. Additionally, 17% of sales volume from merchant power allows APL to capitalise on high-margin opportunities.

“Adani Power’s expertise in reviving stressed assets is evident from the 3.5x Ebitda growth of Mahan Energen post-acquisition,” Incred stated. “The company’s recent additions, like the 1,200MW Mutiara and 600MW Korba plants, strengthen its portfolio as it acquires stressed assets at a low cost and turns them around within 18-24 months.”

Incred also highlighted the company’s deleveraging efforts. “The capital expenditure of Rs 1,20,000 crore is expected to be funded through internal resources, reducing the net-debt to Ebitda ratio from 1.5 times in FY25 to 0.9 times by FY30.”

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