Jefferies sees 35% upside in Adani Green shares, flags demand and execution triggers

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ETMarkets.com

Jefferies has maintained its ‘Buy’ rating on Adani Green Energy.

Jefferies said Adani Green trades at around 20 times one-year forward EV/EBITDA, which it considers attractive given the company's projected 30% EBITDA compound annual growth rate between FY26 and FY30.

Rising power demand could boost Adani Green

Jefferies sees higher electricity demand and improved utilisation as key triggers for the renewable energy company. It highlighted the possibility of El Niño conditions continuing into 2027, potentially bringing higher temperatures and renewed power shortages. Coal stocks are already at critical levels of less than seven days, while state electricity boards are discussing locking in power for 2027.

Adani Green is also expanding its battery energy storage solutions (BESS) business. Its installed storage capacity stands at 6.6 GWh, with plans to exceed 10 GWh by the end of FY27. Jefferies believes this expansion could accelerate amid strong power demand and sees potential upside to its forecast of 6.5-6.8 GW in annual generation capacity additions during FY28-FY30.

Khavda project holds key to utilisation gains

Jefferies said its recent visit to Khavda strengthened its confidence in the company's execution. The project has solar irradiation of around 2,060 kWh per square metre and wind speeds of approximately 8 metres per second, indicating potential utilisation levels of 33% for solar and more than 35% for wind.

Khavda is expected to account for more than 65% of Adani Green's incremental capacity additions by FY30. The brokerage estimates that every 200-basis-point improvement in solar utilisation could add more than 20% to profits.

Balance sheet and execution remain in focus

Jefferies expects net debt to EBITDA to decline to 7.1 times by FY30 from 8.9 times in FY26, assuming installed capacity reaches 44 GW. Long-term power purchase agreements also provide revenue visibility and support cash flow.

The brokerage's upside scenario puts the target price at Rs 2,140, implying 71% upside, while its downside scenario of Rs 1,100 suggests a 12% decline. Key risks include project execution delays, particularly at Khavda, and aggressive bidding.