Jefferies initiates ‘buy’ call on Adani Enterprises with ₹3,800 target price

Brokerage firm Jefferies, on Tuesday, initiated ‘Buy’ call on Gautam Adani-led conglomerate Adani Enterprise (AEL) with target of ₹3800 per share. 

"We expect AEL's EBITDA to double from FY23 to FY26 and grow 3x+ by FY28. We build the contribution of new biz scaling from 40% of consol EBITDA (FY23) to -75% by FY26 and 85% by FY28, At CMP. AEL is trading at 28x/22x FY25/FY26E EV/EBITDA We value AEL on SOTP basis at Rs3800, valuing all biz on EV/EBITDA," the firm said.

Also read: Corporates likely to report 15% EPS growth in FY25; Steel sector to outshine, IT boasts high valuations

The brokerage firm cited factors, while giving the tag, like track record as strong business incubator, 47% CAGR for Airport EBITDA over FY24-FY28E and balance sheet well-placed to take up rise in capex.

Adani Airports commands a substantial 23% share of passenger traffic in India, overseeing operations at eight airports, including the soon-to-be-commissioned Navi Mumbai Airport (NMIAL), according to Jefferies.

Additionally, Adani Airports stands to benefit from its lucrative non-aeronautical ventures, positioning it as a proxy for consumer activity. Recent adjustments to aeronautical tariffs at select airports further enhance its growth prospects. Moreover, the implementation of city-side land development projects and the forthcoming contributions from the soon-to-be-commissioned MIAL Airport add to its promising outlook.

“With new businesses of Airport and Green Hydrogen, we expect EBITDA to grow ~3x over FY24-FY28. AEL is riding on the strong Industry tailwinds in New Energy/ sustainability, Airports, Infra, digitalisation, and import substitution in India,” Jefferies said in its report.

Moreover, the recent Supreme Court order had positive outcome in Adani group's year-long investigation related to short-seller report. While the SEBI is still completing its investigation, the order did suggest no further escalation of the case.

Also read: Smallcap stock sheds 10% after net loss widens to ₹839 crore in December quarter; time to sell?

Meanwhile, Moody’s Investor Group also announced a revision in the outlook for the debt papers of four Adani Group companies, shifting it from negative to stable, on February 13. Concurrently, the stable outlook for the remaining four companies was upheld. Moody's also affirmed the ratings for all eight companies.

The entities whose rating outlooks have been revised include Adani Green Energy Limited (AGEL), Adani Green Energy Restricted Group (AGEL RG-1), Adani Transmission Step-One Limited (ATSOL), and Adani Electricity Mumbai Limited (AEML).

The shares of Adani Enterprises closed in green at ₹3,180 per share on Tuesday, February 13. The scrip has gained over 29.48 percent in the last six months and 81.75 percent in the last one year.