The Adani Group views its leverage position as "strong enough" for the next leg of growth, as the conglomerate plans an ambitious $100 billion capex over the decade towards energy transition and digital infrastructure, it said.
In a recent investor meeting hosted by Jefferies India Pvt. Ltd. in Ahmedabad, the group outlined a strong fiscal 2024 operating performance, a 27% five-year compound annual growth rate, and an improved leverage profile across businesses.
The management expects to capitalise on the large consumer base of Adani's infrastructure platform businesses. Contracted Ebitda is 80% of total group Ebitda and cash reserves stand at more than 20% of borrowing, helping address the group's cash flow and system risk, according to a Jefferies note.
The management does not see a refinancing risk at the group level. Effective capital management planning has been reflected in rate profile stability, with increasing duration despite rate and forex volatility, it said.
Key Highlights
The management does not expect net debt-to-Ebitda to cross around 5 times, while the company is carrying out capex.
Adani New Industries Ltd. aims to tap the emerging green hydrogen opportunity by installing up to 3 million metric tonne capacity over the next decade in phases. Over the next 2-3 years, the company targets to complete the construction of the manufacturing set-up and also a test facility of GH2.
The airport business aims to bid for new airports under the government's privatisation plan.
The planned expansion to 140 metric tonne per annum capacity is progressing well, with 20 MTPA projects under execution and 41 MTPA projects in various stages of development. The recent acquisition of Penna Cement Ltd. will add 14 MTPA of capacity.
The Penna acquisition will strengthen Adani Cement's sea transportation logistics, with five bulk cement terminals at Kolkata, Gopalpur, Karaikal, Kochi and Colombo to serve peninsular India.
Adani Cement plans to consolidate all cement companies under one head in the medium-term.
The company expects a strong Rs 1.1 lakh crore bid pipeline for 12-15 months. It is executing smart metering projects worth Rs 27,200 crore for 22.8 million meters and the management guides for Rs 1,000-2,000 crore smart meter capex in fiscal 2025.
District cooling is a new focus area where the company believes there is significant growth potential.
The company is targeting 6 GW capacity addition in the current fiscal and has also commenced works for pumped hydro project. It is also diversifying its supply chain to de-risk its 2030 capacity addition plans.
AGEL is working on a project with external vendors to develop AI models to improve digital control, given the scale of operations that the company seeks to develop.
The company intends to focus on merchant and commercial and industrial (C&I) capacity and increase the share to 10% of its portfolio.
Jefferies' Valuation Of Adani Group Companies
'Buy' on ACC Ltd. with target price of Rs 3,045, indicating an upside of 17%.
'Buy' on Adani Energy Solutions Ltd. with a target price of Rs 1,365, indicating an upside of 35%.
'Buy' on Adani Enterprises Ltd. with a target price of Rs 3,800, indicating an upside of 19%.
'Buy' on Ambuja Cements Ltd. with a target price of Rs 735, indicating an upside of 12%.
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