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Adani Enterprises experienced a significant surge in its stock price on December 30th, closing nearly 7% higher. This remarkable increase propelled it to the top of the Nifty 50 gainers list, driven primarily by a bullish prediction from brokerage firm Ventura Securities. Ventura Securities issued a price target of Rs 3,801 for Adani Enterprises stock within a two-year timeframe. This target represents a potential upside of approximately 58% based on the stock's closing price on Friday. The increased trading volume further underscored the market's positive response, with 51 lakh shares changing hands—a considerable increase compared to the one-month daily average of 28 lakh shares. This heightened activity indicates significant investor interest and confidence in the company's future prospects.
Despite a one-year delay in its green hydrogen (H2) project, Ventura Securities remains optimistic about Adani Enterprises' future. The brokerage firm believes the stock possesses a considerable upside potential, estimating a sum-of-the-parts (SOTP) value of Rs 3,029 even without factoring in the green H2 vertical's valuation. Ventura acknowledges the recent volatility in the share price, leading to a surge in the stock's beta. However, they anticipate that as market volatility subsides, the beta will decrease, consequently leading to a more favorable valuation for the stock. This underscores the belief that the current price fluctuations are temporary and do not reflect the company's long-term value.
Adani Enterprises has ambitious expansion plans, outlining a capital expenditure (CAPEX) of Rs 6.5-7 lakh crore over the next decade. This significant investment will fuel expansion into diverse sectors including airports, data centers, copper production, and the green hydrogen ecosystem. The company intends to primarily finance this expansion through debt, which will naturally lead to an increase in its net debt-to-equity and net debt-to-EBITDA ratios. Ventura Securities projects these ratios to rise from 1.2x and 1.7x in FY24 to 1.8x and 2.2x by FY27E, respectively. This strategic expansion is a testament to the company's commitment to diversification and long-term growth. The massive capital expenditure, although financed heavily through debt, signifies confidence in the company's ability to generate sufficient revenue to service its debt obligations.
To facilitate this aggressive expansion strategy, Adani Enterprises successfully raised Rs 4,200 crore in Q2FY25 through a Qualified Institutional Placement (QIP). This capital injection attracted robust participation from both international and domestic investors, highlighting the strong interest in the company's growth story. Furthermore, the company secured an additional Rs 800 crore through its first-ever public issuance of non-convertible debentures (NCDs). This move is noteworthy, as it represents a rare instance of a non-NBFC private corporate undertaking such a public issuance within the last decade. These fund-raising efforts demonstrate the company's proactive approach to securing financial resources to support its ambitious growth objectives.
Ventura Securities' financial projections for Adani Enterprises paint a positive picture. The brokerage firm anticipates a Compound Annual Growth Rate (CAGR) of 17.5 percent for consolidated revenue, 37.5 percent for EBITDA, and 45.8 percent for net earnings over FY24-27. These projections translate into impressive figures, with revenue reaching Rs 1.56 lakh crore, EBITDA reaching Rs 28,563 crore, and net earnings reaching Rs 9,245 crore by FY27. The brokerage also projects significant improvements in profitability margins. They forecast a 647-basis-point expansion in EBITDA margins to 18.3 percent and a 255-basis-point rise in net margins to 5.9 percent. These projected improvements are attributed to the strong performance of the airports and solar/wind turbine businesses, as well as the anticipated contributions from the copper vertical.
Ventura Securities further highlights the expected improvement in return ratios. They predict a 563-basis-point increase in Return on Equity (RoE) to 14.5 percent and a 99-basis-point rise in Return on Invested Capital (RoIC) to 11.3 percent. These projected improvements in return ratios underscore the firm's confidence in the company's ability to generate superior returns on its investments. The confluence of strong revenue growth, expanding profit margins, and improved return ratios contribute to the overall positive outlook for Adani Enterprises, supporting Ventura Securities' bullish price target.
It is crucial to acknowledge the disclaimer provided by Moneycontrol.com. The views and investment tips presented in this article represent the opinions of Ventura Securities and not necessarily those of Moneycontrol.com or its management. Potential investors are strongly encouraged to conduct thorough independent research and seek advice from certified financial experts before making any investment decisions. The market is inherently volatile, and past performance is not indicative of future results. The ambitious projections outlined by Ventura Securities, while positive, carry inherent risks, and individual investors should carefully assess their own risk tolerance before considering any investment in Adani Enterprises.
Source: Adani Enterprises stock zooms nearly 7% as brokerage gives Rs 3,801 target price