Jefferies bullish on Adani Enterprises, predicts triple EBITDA growth by 2028

American investment bank and financial services company Jefferies has said Adani Enterprises Ltd (AEL) has strong growth prospects in its new businesses. It expects consolidated operating profit to double in FY26 and grow thrice as much by FY28, Jefferies said in a note to investors. It recommended a buy for AEL stocks.

The investment banking firm expects AEL’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) to triple from the financial year 2024 to 2028. The growth is anticipated due to AEL's involvement in sectors with strong growth prospects, such as sustainable energy, airports, infrastructure, and digital technology, and replacing imports in India with local products.

AEL’s airport operations are expected to significantly increase earnings, benefiting from India’s growing aviation market, profitable non-airport-related businesses, and land development around cities.

Green Hydrogen and New Energy: AEL is building a large-scale Green Hydrogen (GH2) ecosystem, which is expected to be a key driver of its value, especially as production begins around 2027.

Financial Health: The analysis suggests AEL is in a good position to increase its spending on new projects, with a healthier balance sheet than in previous years. Although debt levels relative to EBITDA might rise in the short term, opportunities to raise funds for specific businesses could help manage this.

Regulatory Matters: The text notes that a recent Supreme Court order related to an investigation following a short-seller report has had a positive outcome for Adani Group, with no further escalation expected.

Investment Recommendation: The recommendation is to buy AEL shares, with a target price of ₹3,800, based on a sum-of-the-parts (SOTP) valuation method. This method evaluates each business segment separately for its value. The analysis predicts AEL's earnings will grow substantially by 2028, with new business ventures contributing significantly to this growth.

Risks and Triggers: Potential risks include delays in project completion and the return of financial leverage issues. Positive triggers for the stock value could be the start of operations at the Navi Mumbai International Airport (NMIAL) and the commencement of Green Hydrogen production.

For a 12-month period, Jefferies predicts either of the three scenarios playing out: A moderate growth prediction with an estimated increase in EBITDA and profit after tax (PAT), leading to a target stock price of ₹3,800, a 20 per cent increase. This scenario banks on growth in the Airport sector and the Green Hydrogen ecosystem.

Upside Scenario: A more optimistic prediction with higher growth rates, leading to a target stock price of ₹5,000, a 58 per cent increase. This scenario expects a faster scale-up in new ventures and higher growth in tariffs and non-aero business.

Downside Scenario: A conservative prediction accounting for slower growth, resulting in a target stock price of ₹2,100, a 34 per cent decrease. This scenario anticipates slower development in new projects and lower growth in the aviation and green hydrogen sectors.