Stock to buy for long-term: Ventura sees 50% upside in this Adani stock over 2 years | Stock Market News

Stock to buy for long-term: Adani Enterprises (AEL), a diversified conglomerate, has faced a challenging year in 2024, with its stock down by 11 per cent year-to-date (YTD). However, brokerage firm Ventura Securities believes the company is poised for a strong recovery and could deliver a potential upside of around 50 per cent over the next two years.

Adani Enterprises Target Price

Ventura has assigned Adani Enterprises a ‘buy’ rating, with a sum-of-the-parts (SOTP) based price target of ₹3,801, implying an around 50 per cent upside from the current levels. The brokerage highlighted that recent stock volatility has increased the stock’s beta, but this is expected to normalise over time, potentially aiding valuations.

Strong Financial Growth Anticipated

According to Ventura, AEL’s consolidated revenue, EBITDA, and net earnings are projected to grow at compound annual growth rates (CAGR) of 17.5 per cent, 37.5 per cent, and 45.8 per cent, respectively over FY24-27E. By FY27, the company’s consolidated revenue is expected to reach ₹1,56,343 crore, EBITDA ₹28,563 crore, and net earnings ₹9,245 crore.

Margins are also projected to improve significantly, with EBITDA margins expanding by 647 basis points to 18.3 per cent and net margins increasing by 255 basis points to 5.9 per cent. 

Ventura noted that growth in the airports and solar/WTG businesses, coupled with revenue contributions from the copper segment, would drive this performance. As a result, return ratios are expected to improve, with return on equity (RoE) increasing by 563 basis points to 14.5 per cent and return on invested capital (RoIC) rising by 99 basis points to 11.3 per cent.

Bull and Bear Case Scenarios

The brokerage also outlined Bull and Bear case scenarios for the stock’s FY27 price:

Bull Case: Revenue of ₹1,66,615 crore (CAGR of 20 per cent), EBITDA margin of 20 per cent, and an EV/EBITDA multiple of 23.4x could result in a price target of ₹5,748, reflecting an upside of 138.6 per cent.

Bear Case: Revenue of ₹1,28,336 crore (CAGR of 10 per cent), EBITDA margin of 15 per cent, and an EV/EBITDA multiple of 19.1x could result in a price target of ₹2,179, a downside of 9.5 per cent.

Growth Drivers and Achievements

Ventura highlighted several key developments and growth drivers for AEL:

Green Hydrogen Initiatives: AEL received a Letter of Award for an electrolyser manufacturing facility under SECI’s SIGHT scheme, with a cumulative capacity of 300 MW per annum.

Renewable Energy Expansion: Achievements in wind turbine generation (WTG), including RLMM listing and certifications, bolster its renewable energy portfolio.

Infrastructure Progress: Notable milestones include the operational readiness of Navi Mumbai International Airport and significant progress in data centers and expressway projects.

Strategic Fundraising: AEL raised ₹4,200 crore through a QIP in Q2FY25 and ₹800 crore via NCDs, marking a historic issuance by a non-NBFC private corporate in the last decade.

Additionally, the company is targeting ₹6.5-7.0 trillion in capex over the next decade to expand its presence in airports, data centers, copper, and green hydrogen, primarily funded through debt.

Stock Price Trends

AEL’s stock has delivered negative returns in seven out of the 12 months of 2024. It is currently trading at ₹2,593.45, down by 31 per cent from its 52-week high of ₹3,743 (June 2024). However, it has recovered by approximately 28 per cent from its 52-week low of ₹2,030 (November 2024).

In December 2024, the Adani Group stock gained 3 per cent after two consecutive months of losses, including a 16.4 per cent drop in November and a 6 per cent decline in October.

Outlook

Despite volatility triggered by external factors, including a U.S. Department of Justice (DOJ) notice in November 2024, Ventura remains optimistic about AEL’s robust fundamentals and operational strengths. With strong growth projections and ambitious expansion plans, Adani Enterprises is positioned as a resilient player with significant upside potential.

Investors are advised to watch the company’s performance closely, particularly in its green energy and infrastructure businesses, which are likely to drive future growth, the brokerage said.

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.