Adani Power (ADANIPOWER)

FairStock Score: 83/100 — HIGH CONVICTION

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• ROE of 19.33% and ROCE of 22.54% show efficient capital use.
• Free cash flow of ₹4,359 crore provides internal cushion for debt repayment or reinvestment.
• Balance sheet appears manageable: Debt/Equity 0.83, Current Ratio 1.86, Altman Z-Score 3.98.
• 5-year revenue CAGR of 16.47% demonstrates historical capacity expansion and scale.
• Latest quarter net profit of ₹2,488 crore on sales of ₹12,451 crore indicates strong near-term earning power.

Concerns

• Sales growth of -1.94% and profit growth of -12.34% show current business deterioration.
• Valuation is rich: P/E 23.59, P/B 7.07, Graham Number ₹63.70, and DCF intrinsic value ₹6.73 versus price ₹214.25 imply no margin of safety.
• EV/EBITDA of 257.30 is extremely elevated, suggesting the market is pricing in unrealistic future profitability.
• Zero dividend yield and 74.96% promoter holding mean minority shareholders get limited direct returns and have a very small free float.

AI Analysis

Let me look at Adani Power the way I'd look at any business. It is a large integrated power utility, and I like predictable cash flows. Over five years, revenue compounded at 16.47%, but the latest year sales fell 1.94% and profits dropped 12.34%. That tells me current momentum is not with the business; in a commodity-like power market, yesterday's growth does not guarantee tomorrow. The returns on capital are respectable: ROE is 19.33%, ROCE is 22.54%, and free cash flow is ₹4,359 crore. So it is not a bad business. But price matters more than story. At ₹214.25, the market values it at 23.59 times earnings and 7.07 times book, while book value is only ₹30.31. Graham would remind me that even a wonderful enterprise must be bought with margin of safety. Here, the Graham Number is ₹63.70, and a DCF based on the figures gives ₹6.73. That is not a cushion; it is a cliff. The EV/EBITDA of 257.30 is particularly telling — the market is paying an extraordinary multiple for each rupee of operating earnings. The balance sheet is manageable: debt/equity is 0.83, current ratio is 1.86, Altman Z-Score is 3.98, and Piotroski F-Score is 6/9. But zero dividend and high promoter holding of 74.96% mean minority shareholders must rely entirely on capital appreciation. In a cyclical utility with sales and profit declining, paying 23 times earnings leaves no room for error. I would wait for a much lower price and clearer signs of demand growth before committing capital.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer