Adani Enterprises: 4 key reasons why Jefferies expects 17% upside for the stock post start of its copper unit

Adani Enterprises share price that has risen 90% in last year has more than doubled from lows seen in February last year. 

Analysts at Jefferies India Limited however expect almost 17% upside for Adani Enterprises led by commissioning of Copper unit first phase and expansions being undertaken during second phase.  The target price of Jefferies for Adani Enterprises stands at ₹3800 while the stock is trading at close to ₹3260 levels.

Adani's Copper unit starts shipping cathodes

Adani Enterprises Limited's subsidiary Kutch Copper recently had inaugurated the first unit of its greenfield copper refinery project in Mundra on March, 28 by shipping the first batch of cathodes to a client.

This  project represents a significant milestone for Adani Enterprises as it expanded and entered into a new industry and enhances the domestic copper supply in India. 

Also Read- Sobha, DLF, Phoenix Mills and 3 other realty stocks delivered 100%-235% returns in FY24; check full list

Copper producers in India

Hindalco Industries and Vedanta Ltd have remined two well known copper producers while public sector undertaking Hindustan Copper Limited is an integrated manufacturer. Vedanta Copper production at Tuticorin however remains impacted.  With capacity constraints in country amidst rising domestic demand and export opportunities, Adani Enterprises entry into Copper cathode production is expected to be fruitful. Adani Enterprises is expected to reap benefits with start of first phase of 500,000 tonne per annum capacity. Second phase with similar capacity will likely start in the year.

Adani to benefit from start of production

Analysts at Jefferies said that start of Copper unit marks the Adani Portfolio’s debut in the metal industry. The full project once commissioned will be one of the largest single-location custom smelter in the world.

Copper constitutes about 10% of Adani Enterprises FY26 estimated Ebitda and 3% of Enterprise Value Mix in Sum of the Parts valuations. Ebitda stands for earnings before interest, tax, depreciation and amortisation.

Over the last two decades Adani Enterprises has developed and listed a number of business entities in the areas of ports, power, CGD, transmission, and FMCG, including through demergers.

Given that numerous other projects are planned for the future in new industries like Green Hydrogen, Data Centers, and Airports, the planned commissioning of the Copper Project as per analysts suggests the group's sustained ability to plan and execute large-scale projects.

Also Read- Stocks to buy in April: Coal India, ICICI Bank, SBI , Bharti Airtel are among top 15 picks by Axis Securities

Strategic location of the plant

The copper facility, which is strategically located in Mundra, aims to create synergies by utilizing the Adani group's current infrastructure. As per Jefferies analysts Adani enterprises  aims for a conversion cost that is in the top quartile among its rivals. Adani Enterprises aims to capitalize on the Adani Group's presence in energy infrastructure, logistics, and resource trading, among other areas. The project's power needs will be met by Adani Power or the grid, and the APSEZ's seawater de-salination process will supply all of the water needed.

Benefits to accrue from demand, products and diversification

Key demand drivers include electrical vehicles, renewable energy, construction, electric consumption, telecommunication market.

While Copper Cathodes are the primary product, the other product line also includes copper rods, sulfuric acid, phosphoric acid, aluminum fluoride, gold, silver, and selenium, highlight analysts. As part of its forward integration strategy, Kutch Copper is aiming to establish Kutch Copper Tubes Limited in order to expand its copper tube portfolio, said analysts at Jefferies.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions