Brokerage Call: 2 Adani Group Stocks To Buy Next Week For Potential Upside of Up To 50%

The two Adani Group companies that have got buy calls from top Indian brokerages are Adani Green Energy and ACC Ltd. While ICICI Direct Research has set a target price of Rs 3225 for ACC in 12 months, Ventura Securities has set a target price of Rs 2,830 for Adani Green Energy in 24 months.

Adani Green Energy Share Price Target

"Post Hindenburg controversy, Adani Green Energy Limited (AGEL) experienced a significant decline of approximately 77% in its stock price. However, the stock has since rebounded strongly, gaining 288% and reaching a CMP of INR 1,890 per share. Taking advantage of the steep decline, marquee investors like GQG and IHC have shown confidence in the company by increasing their stakes. Promoters are reinforcing their commitment by injecting INR 9,350 crore through the issuance of warrants, with INR 2,338 crore already infused at INR 1,481 per share," said Ventura Securities in a report on 4th April.

"Moreover, TotalEnergies has strengthened its strategic partnership with AGEL by investing USD 300 million in an AGEL subsidiary, acquiring a 50% stake in the projects. Our discussions with management indicate the company's core growth plans remain largely intact, although there may have been some minor delays. AGEL's strength lies in its robust business model, characterized by long-term PPAs with a 25-year fixed term. These agreements ensure a predictable cash flow stream, mitigating external factors," the brokerage further added.

"With 2,848 MW of renewable capacity being added in FY24, the total operational renewable generation capacity has increased to 10,934 MW (largest in India). Looking ahead, AGEL's ambitious plans to further scale up its capacity to 20 GW by FY26 and an even more substantial 45 GW (out of which Khavda will contribute 30GW) by 2030 demonstrate their confidence in capturing a significant share of the renewable energy market. This signifies a projected CAGR of 28% in AGEL's capacity expansion over FY23-FY30," Ventura Securities in a note.

"We expect revenues to grow at a CAGR of 26.5% INR 1,9950 cr, EBITDA is expected to grow at CAGR 38.9% to INR 1, 8358 cr with 92% margins (+2870 bps) by FY27, while net earnings are expected to grow from INR to INR 4,262 cr (CAGR of 44.8%) with 17.8% margins (+610bps). We initiate coverage on AGEL with a BUY for a price target of 2830(69.9x FY27 P/E) representing an upside of 49.7% from the CMP of INR 1890 over the next 24 months. While the current valuations may seem demanding, the high growth earnings trajectory should ensure that the valuations sustain. Key risks to our thesis:- Sharp slowdown in the global economy," the brokerage stated.

ACC Share Price Target

"As of Dec-2023, company's cement capacity stands at 38.6 mtpa after the recent expansion at Amethi (1 mtpa cement grinding) and acquisition of balance 55% (1.54 mtpa) in Asian Concretes. Further, with expansion of 4 mtpa (1.6 mtpa at Sindri, Jharkhand, 2.4 mtpa at Salai Banwa, UP), company's capacity to reach 42.6 mtpa by FY26E. We believe that, company's volumes to grow at ~10% CAGR over FY23-26E to 40.8 mtpa by FY26E, led by ramp-up of recent capacity additions, upcoming expansions and pick-up in demand along with synergy benefits from parent company's units. Moreover, commencement of 3.3 mtpa clinker at Amethi would further help in cement production growth," said ICICI Direct Research in a note on 4th April.

"We expect ACC to benefit substantially in terms of margins expansion, led by focus on operational efficiencies led by increasing waste heat recovery power share to 25% by FY25E from 9% at present, benign fuel prices and positive operating leverage (led by healthy volume growth). We also believe that, the potential synergy benefits from parent's other units (master supply agreement) & businesses (ports & logistics) would further help in improving its efficiencies in terms of raw material, power & fuel and freight cost. Moreover, we believe that company's cement realisation would also rise in the coming periods led by pick-up in demand, increasing industry consolidation and increasing share of premium products. Thus, going ahead, we estimate EBITDA/ton to improve to Rs 950/ton by FY26E (from Rs 498/ton in FY23 and Rs 840/ton in 9MFY24)," ICICI Direct said.

"We believe that ACC is strongly positioned led by strong parentage, focus on operational efficiencies, healthy volume growth & strong balance sheet with net-cash position. We expect revenue to grow at ~9% CAGR over FY23-26E to Rs 22,879 crore in FY26E. However, EBITDA & PAT are expected to grow at ~44% & ~73% CAGR over the same period to Rs 3880 crore & Rs 2446 crore respectively in FY26E, led by considerable margin expansion. Valuation at 11.2x EV/EBITDA on FY26E basis (EV/ton of $123/ton) looks attractive considering the multiple tailwinds. We recommend BUY on ACC with target price of Rs 3225 per share (based on 14x FY26E EV/EBITDA)," ICICI Direct Research stated.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.