Adani Power is India’s second-largest thermal power generation company after NTPC, on its journey to raise capacity by 1.7 times from 17.6 GW to 30.7 GW by 2030.

“Land requirements and financing plans are in place. Close co-ordination with BHEL for equipment delivery and inhouse EPC are ensuring Capex is on schedule. Thermal capacity in an overall peak deficit scenario with merchant exposure is a positive. Initiate coverage at Buy, with 30 per cent potential upside,” said Jefferies in its note.

The Adani Group company operates 12 power plants across eight states with 87 per cent capacity tied up with Power Purchase Agreements (PPA).

About 98 per cent of the open capacity is closer to coal mines, enabling economical sourcing of coal. Coastal plants (43 per cent capacity) are dependent on imported coal but have a fuel cost pass- through/indexlinked price escalation in place.

According to the brokerage, Adani Power’s merchant capacity should be 12-13 per cent by FY30E, with an EBITDA contribution of 19-20 per cent vs closer to 30 per cent currently.

“We assume Rs 6/unit merchant realisations, vs Rs 7/unit average realisation for APL in FY24. Every 5 per cent rise in merchant realisation is a 2 per cent rise in FY27E EBITDA,” said Jefferies, adding that “we believe power demand should recover back to 7 per cent levels vs recent weakness, which is similar to the past Capex upcycle phase of FY03-09. This is a key trigger for the stock.”

The brokerage estimates 10 per cent EBITDA CAGR for APL in FY24-27E, rising to 19 per cent CAGR over FY27E-30E as new capacity becomes operational.

The share of the company was trading up at Rs 504 apiece on Tuesday.

Meanwhile, Adani Power reported 7.4 per cent growth in net profit at Rs 2,940 crore in Q3 FY25, compared to Rs 2,738 crore in the same period last fiscal (FY24).

Consolidated EBITDA for Q3 FY25 was higher by 23 per cent at Rs 6,185 crore compared to Rs 5,009 crore in Q3 FY24, supported by higher one-time income, the Adani Group company said in its stock exchange filing.

Total revenue rose by 11 per cent at Rs 14,833 crore against Rs 13,355 crore in Q3 FY24, primarily due to higher volume.