Adani Enterprises Limited- The Goose that Lays Golden Eggs: Report by Ventura Securities

New Delhi: Adani Enterprises Ltd (AEL), the flagship entity of Adani Group's consolidated revenue and net profit to have a CAGR of 19.5% and 107.3%, respectively, to INR 1,18,612 Cr and INR 6,917 Cr during FY22-25E due to various strategic advantages said, Ventura Securities limited report.

• Adani Airports, which manages an enviable portfolio, offers clear revenue visibility for the next 50 to 70 years, at least.
• Their foray in the green hydrogen space is not only about being a first mover in India, but is a platform on which Adani is primed to scale globally.
• Data Centres, another mushrooming space & prime opportunity given India's demographic offer clearly visible potential for AEL.
• With India's focus on self-sufficiency in the Defence sector, AEL's vertical for production of small arms, UAVs, drones & aircraft parts is also strategically placed.
• The cherry on the cake is the capital and cash flow management capabilities of the firm.

India is a growth market. Domestic consumption and infrastructure growth have so far been the two most sought after themes. Now there’s one more addition to the list—climate changes. But when it comes to capturing the boom in new areas, investors have limited options, at least in the listed space. For instance, it won’t be an exaggeration to say JCB was the poster boy of India’s infra structure growth but it’s not a listed entity.  

Similarly, individual investors don’t have access to a number of start-ups operating in the climate-change ecosystem today which might become tomorrow’s leading sci-tech companies. 

Ventura’s research team is always on the lookout for unique opportunities in upcoming areas. After initiating coverage on a few Adani group companies in December 2021, Ventura placed all the group companies on its radar. 

The recent developments at Adani Enterprises Limited (AEL) have been awe-inspiring which compelled Ventura’s research arm to dig deeper into this goldmine. 

Adani Enterprises alone can give investors an instant exposure to investment themes such as Green Hydrogen, Airports, Roads, Defence, Data Centers and Digital Labs to name a few. 

The snapshot might raise some eyebrows. Yes, AEL trades at a P/E multiple of 149 on FY23 estimated earnings.  The company has a Net-Debt to EBITDA of ~10X and has massive capex commitments for the next 8-10 years. But such companies can’t be valued on traditional metrics. 

Ventura’s reading between the lines brings out a story that’s completely missed-out even by seasoned investors. Adani Enterprises will demonstrate India’s preparedness to become a manufacturing hub in sunrise industries.  AEL is building scale that would instill confidence in global corporations/governments looking to diversify their supply-chains away from China. Total’s association with AEL is a testimony. 

Most of its new businesses are still in an investment phase or at a nascent stage of profitability and thus financials don’t reflect the true potential of each business vertical AEL caters to.

According to Ventura Research’s estimates, India alone will require 11.2 million tonnes of green hydrogen by 2030 which translates into an opportunity of over Rs ~1.75 lakh crore. Adani Enterprises is targeting 2.5 million tonnes of capacity which can roughly meet ~22% of India’s green H2 demand. However, the company doesn’t want to remain just a commodity player. It will utilize 60% production for captive purposes—to manufacture value added products.

It will have backward integration as well. AEL will use its captive renewable energy in hydrogen manufacturing.