ICICI Securities has maintained a BUY rating on Adani Power, revising the target price upwards to Rs 187 from Rs 134, reflecting the company’s robust capacity expansion, successful power purchase agreements (PPAs) at attractive tariffs, and solid operational performance. Despite a marginal decline in earnings due to higher depreciation and deferred tax, the company continues to demonstrate steady growth in power sales and a strong bidding pipeline for future capacity tie-ups. Investors are advised to watch key support and resistance levels as Adani Power navigates a transformational phase marked by aggressive capacity additions and strategic asset acquisitions. The ICICI Securities research report provides a detailed outlook, financial metrics, and risks associated with the stock poised for upward momentum.

ICICI Securities Reaffirms BUY for Adani Power

ICICI Securities, a respected institutional equity research firm, has reaffirmed its BUY recommendation on Adani Power. The brokerage highlights the company’s strategic doubling of its under-construction capacity from 12 GW to 25 GW, accompanied by PPAs covering 11 GW, including a leadership position in Assam with 2.4 GW at lucrative tariffs. This expansion and contractual security underpin the bullish stance, with a revised price target of Rs 187 per share. ICICI Securities views Adani Power’s superior execution in placing Balance of Plant (BoP) orders early on its entire construction portfolio as a major competitive advantage, expecting further PPA tie-ups in the next 12-18 months to solidify future earnings visibility.

Operational Highlights and Financial Performance

The recent Q2FY26 earnings reveal resilience amid subdued industry demand. Adani Power posted revenues of Rs 134 billion, a 1% year-on-year increase, while EBITDA slightly declined by 2% to Rs 50 billion, closely aligning with analyst expectations. Profit after tax (PAT) decreased by 12% to Rs 29 billion, impacted primarily by higher depreciation from new capacity and increased deferred tax obligations. Power sales volumes rose 7% to 24 billion units, although merchant power realization fell 9% year-on-year to Rs 5.4 per unit. The plant load factor (PLF) moderated to 63%, down 410 basis points, reflecting softer demand and early monsoon effects.

Attractive Power Purchase Agreements (PPAs) and Capacity Expansion

Adani Power signed new long-term PPAs amounting to 5 GW during the quarter, with standout agreements including 2.4 GW at Rs 6.07/unit with Bihar DISCOM and 1.6 GW at Rs 5.83/unit with Madhya Pradesh DISCOM. Additionally, a medium-term PPA of 500 MW at Rs 5.79/unit with Maharashtra DISCOM and a Letter of Award (LOA) for 570.5 MW from Karnataka’s Power Company underscore the company's strong tariff discipline. The company’s leading position as L1 bidder for 3.2 GW capacity in Assam further bolsters its pipeline. Execution across brownfield expansions—Raipur, Mahan, and Raigarh—progresses swiftly, with incremental capacity expected online progressively between FY27 and FY29.

Revised Earnings Outlook and Valuation

Despite near-term challenges reflected in earnings moderation for FY26, ICICI Securities has upgraded its valuation multiple, recognizing enhanced visibility from secured PPAs and the robust bidding pipeline across states. The firm's new target price of Rs 187 incorporates the expanded capacity and better pricing framework. Key financial metrics forecast net revenue growth from Rs 562 billion in FY25 to Rs 701 billion by FY28, with EBITDA margins expanding to 45%. Return metrics like RoCE and RoE are expected to remain healthy, though modestly moderated by ongoing asset addition and leverage. Key valuation indicators recommend the stock as undervalued relative to its growth potential.

Key Stock Levels and Investor Guidance

Investors tracking Adani Power should monitor these critical price levels:

With a healthy free float of 20% and institutional ownership above 14%, the stock is positioned for stability with momentum potential. Traders should be cautious of volatility stemming from merchant price fluctuations and fuel supply risks but remain optimistic given the strategic initiatives and operational scale.

Risks to Consider

Potential headwinds for Adani Power investors include delays in project execution, exposure to merchant power price volatility, fluctuations in coal supply and costs, and counterparty risks related to DISCOMs. Additionally, macro factors such as monsoon patterns and policy shifts in the energy sector can materially impact performance. Adani Power’s aggressive expansion, while positioning it well for future demand, makes timely completion and tariff realization critical to sustaining upward momentum.

Bottomline

ICICI Securities' comprehensive analysis paints a compelling growth narrative for Adani Power, premised on aggressive capacity ramp-up, secured long-term PPAs at premium tariffs, and a forward-looking project pipeline. While near-term profitability shows some softness due to increased depreciation and lower merchant realizations, the medium to long-term outlook remains robust with improving power demand in India. The reaffirmed BUY call with an elevated target of Rs 187 encapsulates confidence in the company’s strategic direction and execution capabilities, making this stock an attractive proposition for investors keen on the power sector's transformative phase.