Brokerage Call: Invest in Two Adani Group Stocks Next Week for a Possible 50% Gain

Adani Green Energy and ACC Ltd. are the two Adani Group firms that have received purchase calls from leading Indian brokerages. Ventura Securities has set a target price of Rs 2,830 for Adani Green Energy in 24 months, while ICICI Direct Research has set a target price of Rs 3225 for ACC in 12 months.

Target Price for Adani Green Energy Shares
“Adani Green Energy Limited (AGEL) had a notable decrease in its stock price of around 77% after the Hindenburg scandal. Since then, however, the stock has made a significant comeback, rising 288% to a CMP of INR 1,890 a share. Prominent investors like GQG and IHC have increased their interests in the firm, demonstrating their faith despite the sharp decrease. In a report published on April 4, Ventura Securities said, “Promoters are strengthening 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.”

“In addition, TotalEnergies has enhanced its strategic alliance with AGEL by contributing $300 million to an AGEL subsidiary, so obtaining a 50% ownership in the projects. Our conversations with management suggest that although there may have been a few small setbacks, the company’s primary expansion goals are still essentially in place. AGEL’s strength is its solid business model, which is defined by PPAs that have a set 25-year tenure. By limiting external influences, these agreements offer a stable cash flow stream,” the brokerage said.

“The overall operational renewable generating capacity has grown to 10,934 MW (biggest in India) with 2,848 MW of renewable capacity installed in FY24. AGEL is confident in securing a considerable portion of the renewable energy market, as shown by its ambitious ambitions to further scale up its capacity to 20 GW by FY26 and an even more substantial 45 GW by 2030 (of which Khavda will contribute 30 GW). According to a report from Ventura Securities, “This represents a projected CAGR of 28% in AGEL’s capacity expansion over FY23-FY30.”

“We anticipate a CAGR of 26.5% growth in revenues.” By FY27, it is anticipated that EBITDA would increase from INR 1,9950 cr at a CAGR of 38.9% to INR 1, 8358 cr with 92% margins (+2870 bps), while net profits will increase from INR to INR 4,262 cr at a CAGR of 44.8%) with 17.8% margins (+610 bps). With a price objective of INR 2830 (69.9 times FY27 P/E), which represents a 49.7% increase from the CMP of INR 1890 over the next 24 months, we begin coverage on AGEL with a BUY recommendation. The strong growing earnings trend should guarantee that the present values hold, despite their seeming demand. Important dangers to our thesis include a sharp downturn in the world economy, according to the brokerage.

Target for ACC Share Price
“After the latest expansion at Amethi (1 mtpa cement grinding) and purchase of balance 55% (1.54 mtpa) in Asian Concretes, the company’s cement capacity as of December 2023 is 38.6 mtpa. Additionally, the company’s capacity will reach 42.6 mtpa by FY26E with an addition of 4 mtpa (1.6 mtpa at Sindri, Jharkhand, and 2.4 mtpa at Salai Banwa, UP). We predict that the company’s volumes will increase at a CAGR of almost 10% during FY23–26E, reaching 40.8 mtpa by FY26E. This growth will be driven by recent capacity additions ramping up, planned expansions, and a pick-up in demand, as well as synergistic advantages from parent company’s divisions. Additionally, the start of the 3.3 mtpa clinker at Amethi will contribute in the expansion of cement output, according to a note released by ICICI Direct Research on April 4.

“We anticipate significant margin improvement for ACC, driven by a focus on operational savings, which will increase waste heat recovery power share from 9% to 25% by FY25E from its current level of 9%, benign fuel costs, and positive operating leverage, which will be driven by robust volume growth. Additionally, we think that the potential synergy advantages from the parent company’s other companies (ports, logistics, and master supply agreement) would assist to further improve its efficiency in terms of raw material, electricity, and fuel costs as well as freight costs. Furthermore, we think that a recovery in demand, a rise in industry consolidation, and an increase in the percentage of premium goods will all contribute to the company’s cement realization in the next years. Therefore, we project that EBITDA/ton would increase moving forward to Rs 950/ton by FY26E (from Rs 498/ton in FY23 and Rs 840/ton in 9MFY24),” according to ICICI Direct.

“ACC is well-positioned, in our opinion, thanks to its solid parentage, emphasis on operational effectiveness, robust volume growth, and strong financial sheet with net cash position. Over FY23–26E, revenue is expected to expand at a CAGR of almost 9%, reaching Rs 22,879 crore in FY26E. However, due to significant margin improvement, EBITDA and PAT are predicted to expand at ~44% and ~73% CAGR over the same period to Rs 3880 crore and Rs 2446 crore, respectively, in FY26E. Given the several tailwinds, valuation at 11.2x EV/EBITDA on an FY26E basis (EV/ton of $123/ton) is appealing. According to ICICI Direct Research, “We advise BUY on ACC with a target price of Rs 3225 per share (based on 14x FY26E EV/EBITDA).”