Adani stocks rise up to 7% as Jefferies remains bullish

Shares of Adani Group companies rose on Friday after foreign brokerage Jefferies said Adani Group is back on an expansion spree and eyeing $90 billion capex over the next decade.

A short seller report hit Adani Group's market cap during the later part of the financial year 2022-23. In FY24, Adani Group focused on containing debt, and reducing founders share pledges, Jefferies says after analysing the earnings performance of the Gautam Adani-led conglomerate.

Jefferies has a ‘Buy’ rating on four Adani Group companies – flagship Adani Enterprises, Adani Ports and Special Economic Zone, Adani Energy Solutions, and Ambuja Cements.

Reacting to the development, shares of Adani Enterprises rose as much as 7% in intraday trade to hit a high of ₹3,421 on the BSE. Adani Ports and Special Economic Zone gained as much as 5% to ₹1,450.95 on the BSE. The Ambuja Cements stock rose 3.3% to ₹639.40. Adani Energy Solutions jumped nearly 5% to hit a high of ₹1,150.80.

During FY24, EBITDA of the the Adani group’s listed entities grew 40% year-on-year to ₹66,000 crore, with more than doubling of Adani Power's EBITDA on capacity addition, higher volumes, merchant contribution and lower imported coal prices. For other group companies, EBITDA growth was in the range of 16-33%, except Adani Wilmar which saw a year-on-year decline.

Adani Enterprises’ 29% EBITDA growth was led by growth in new incubating businesses (ANIL/solar, Airports) and IRM trading Business. Adani (Ambuja) Cement's EBITDA scale up was led by sharp uptick in unit EBITDA. Adani Port's EBITDA growth was led by 24% growth in volumes. Adani Energy Solutions’ 16% EBITDA was driven by new line addition. Adani Total Gas's 27% growth was driven by around 15% volume growth and gross margin expansion aided by lower gas costs. Adani Wilmar's EBITDA declined year-on-year due to inventory losses (dip in oil prices) and misalignment of hedges, says Jefferies.

Jefferies says leverage ratio improved to multi-year low at group level. Net debt at the group level - 8 companies and debt related to cement business acquisition - remained stable at ₹2.2 lakh crore in FY24 versus ₹2.3 lakh crore. Adani Ports and Adani Power saw a drop in net debt in FY24. The increase in leverage for Adani Enterprises and Adani Green was on back of new capex projects undertaken by companies.

Adani Enterprises is scaling its captive manufacturing capacity towards starting green hydrogen production by FY27, says Jefferies. Navi Mumbai Airport appears likely to commission by Q4 FY25, it says. Adani Cement management continues to guide doubling of cement capacity and scale up in unit EBITDA to industry leading ₹1,450-1,500 per tonne by FY28, the brokerage says. Adani Ports EBITDA is expected to rise at 16% CAGR led by expansion and ramp-up with the company targeting 1 billion ton cargo volume by 2030, it says. Adani Green raised its 2030 power capacity target from 45 GW to 50 GW now including 5GW pumped hydro.