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According to a report by Jefferies, Adani Energy Solution's (AESL) growth story remains intact.
In its third-quarter update, AESL highlighted that the company added 225 km to its transmission network, taking the total to 26,485 km. At the start of FY25, two new projects boosted the pipeline business to Rs 547 billion from Rs 170 billion. The company maintained robust system availability at 99.7 per cent. The capital management program started by AESL focuses on reducing volatility in interest costs through long-tenure bonds. AESL won two transmission projects of Rs 250 billion, related to renewable energy parks in Rajasthan during 3QFY25. With these projects AESLs market share in competitive projects has gone up to 24 per cent from 17 per cent. The company indicated a robust pipeline in near-term tendering at Rs590 bn, up 55 per cent (YoY) on its recent 2nd quarter call. Jefferies says, "We believe AESL should see 16 per cent revenue CAGR and 62 per cent PAT CAGR in FY24-27E, driven by locked-in growth in both Transmission and Distribution business." By October 2026, AESL has targeted to commission projects worth Rs273 billion. The cancellation of Tamil Nadu smart meter tenders is not a part of the existing pipeline. The company is executing smart metering projects of 22.8 mn meters, i.e. around Rs 272 billion. Recently, Tamil Nadu government has scrapped AESLs 8.2 mn smart meter bid stating that while AESL is the lowest bidder, they believe the bid price is fairly high. The company says this does not impact AESL's current under-execution projects as they are not a part of the 22.8 mn. Jefferies says, "In our view, the company is realising the business potential on both smart metering and distribution. Distribution losses declined 80 bps YoY to 4.66 per cent on stable collection efficiency." AESL says the company's smart meter projects are in line and progressing well. 4.5 mn smart meters should be added by the end of FY25E and by FY26E the target is to achieve 10 mn smart meters, of which 7 mn is from the existing contracts and balance from new project wins. AESL's says it will minimise volatility in its asset base across parameters, debt is being refinanced and raised to match the life of the respective assets at a fixed rate, vendor back-to back arrangements are being made to limit the impact of commodity price changes and land studies are being done for faster project commissioning. Jefferies says its long-term view on AESL, is that it has established competence in commissioning and enduring transmission line networks below budgeted costs and tenures. The company is expanding B2C revenues by providing additional durable sales services to consumers on distribution. In the base case scenario, AESL revenue will be up by 16 per cent and 31 per cent CAGR between FY24 to FY27. The company has transmission projects worth Rs 274 billion that are expected to commercialise in the coming years. In the upside scenario, Jefferies predicts AESL to benefit from the Distribution Amendment Act, and additional projects wins. (ANI)
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