Adani Ent an attractive play on capex theme, says Jefferies; initiates coverage with 19% upside

Foreign broking firm Jefferies on February 13 initiated coverage on Adani Enterprises with a “BUY” rating, projecting a doubling of EBITDA by FY26. It has set a target price of Rs 3,800 on the stock, citing key triggers such as the commissioning of Navi Mumbai Airport and green hydrogen manufacturing units.

Jefferies’ target price indicates a 19 percent upside from last closing price of Rs 3,180.

Despite potential risks such as project delays and leverage issues, Jefferies remains optimistic about Adani Enterprises’ growth trajectory and investment potential.

The broking firm has noted in its recent report that Adani Enterprises, since inception, incubated and unlocked value in self-sustaining businesses such as ports, power, city gas distribution, transmission, and FMCG.

“It is now building new businesses in airports, new energy/ Green Hydrogen (GH2), data center, roads, and copper, some of which will also likely find their way to demergers (value unlocking) over the next decade,” Jefferies said.

For building the new businesses, the company will invest $5-7 billion capex annually over FY24-28 and the balance sheet is ripe to undertake capex again, believes the broking firm as net debt/EBITDA has come down to 3.2x in FY23 from 6x+ average in FY14-18.

“While net debt/EBITDA may again touch 6x in near term, we believe fund-raising opportunities at the business level may partly assuage it,” the report said.