ADANIPOWER - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 3.7

📊 Core Financials

• Revenue & Profitability: PAT declined from 3,119 Cr. to 2,735 Cr. (Qtr Var -7.43%), showing short-term earnings pressure.
• Margins: ROE at 27.0% and ROCE at 23.7% reflect strong efficiency and profitability.
• Debt: Debt-to-equity ratio of 0.94 indicates high leverage but manageable for a capital-intensive sector.
• Cash Flow: Dividend yield is 0.00%, with reinvestment favored over payouts.

💹 Valuation Indicators

• P/E Ratio: 24.3 vs Industry PE of 21.9 — slightly above fair value.
• P/B Ratio: Current Price 142 ₹ vs Book Value 24.8 ₹ → ~5.7x, moderately expensive.
• PEG Ratio: 0.76, suggesting valuation is aligned with earnings growth.
• Intrinsic Value: Current price is near fair value, offering limited margin of safety but supported by strong returns.

🏢 Business Model & Competitive Advantage

• Adani Power operates in thermal power generation, a critical infrastructure sector in India.
• Competitive advantage lies in scale, integration within the Adani Group, and long-term power purchase agreements.
• Strong return metrics support sustainability, though sector risks include regulatory and fuel cost volatility.

📈 Entry Zone & Long-Term Guidance

• Entry Zone: Attractive near 120–135 ₹ range, closer to DMA 200 and support levels.
• Long-Term Holding: Suitable for investors seeking exposure to India’s power sector growth, but leverage risk must be monitored.

✅ Positive

• Strong ROE (27.0%) and ROCE (23.7%).
• PEG ratio (0.76) indicates valuation aligned with growth.
• DII holdings increased (+0.94%), showing domestic institutional confidence.

⚠️ Limitation

• High debt-to-equity ratio (0.94) reflects leveraged balance sheet.
• P/B (~5.7x) indicates premium valuation.
• Dividend yield is 0.00%, limiting income appeal.

📉 Company Negative News

• PAT declined (-7.43%) quarter-on-quarter, showing earnings weakness.
• FII holding reduced by -0.93%, reflecting declining foreign investor confidence.

📈 Company Positive News

• DII holdings increased (+0.94%).
• Strong return metrics highlight operational efficiency.
• Stock trading near DMA 200, offering potential accumulation opportunity.

🌐 Industry

• Industry PE at 21.9, slightly lower than Adani Power’s valuation.
• Power sector benefits from rising electricity demand and infrastructure expansion in India.

🔎 Conclusion

• Adani Power is fundamentally strong with high ROE and ROCE, but faces earnings volatility.
• Valuations are slightly stretched compared to industry peers, with leverage as a key risk.
• Best suited for accumulation near 120–135 ₹ levels.
• Long-term investors can hold for exposure to India’s power demand growth, but should monitor debt and profitability trends.