I purchased Adani Power shares on the day of budget 2022, i.e. February 1 2022, for Rs.111/share, and now you can see the growth.
Let’s see why I purchased it by understanding the fundamental and technical analysis of the stock.
ADANI GROUP Adani Group is a large conglomerate in India with a market cap of over $212.23 billion (as of April 25, 2022), comprising seven publicly traded companies. It has created a world-class transport and utility infrastructure portfolio with a pan-India presence. Adani Group is headquartered in Ahmedabad, Gujarat, India.
Over the years, Adani Group has positioned itself as the market leader in its transport logistics and energy utility portfolio businesses, focusing on large-scale infrastructure development in India with O & M practices benchmarked to global standards. It is the only Infrastructure Investment Grade issuer with four IG-rated companies in India.
ADANI POWER Adani Power Limited (APL), a part of the diversified Adani Group, is India’s largest private thermal power producer.
They have a power generation capacity of 12,450 MW comprising thermal power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh and a 40 MW solar power project in Gujarat.
Why did I purchase the stock? Finance Minister, in her speech, talked about the PM GATI shakti plan, which focuses on various aspects, including the Renewable energy sector, which is why we may expect the power sector to go up in future.
Moreover, Adani Power already has a stronghold in the renewable energy sector and has already invested a lot in the renewable industry.
The Crude Prices have been rising since February, and we can expect that soon, renewable energy will be a substitute for it. The EV revolution has also begun being led by the companies like OLA and TATA Motors, so we can expect ADANI to invest in charging stations.
Fundamental Analysis Adani Power has a robust management system led by Gautam Adani as a chairman, a college dropout with immense business management experience. 98% of the company’s revenue is generated from Power Supply and 2% from others.
The company has an installed thermal power capacity of 13,650 MW spread across six power plants in Gujarat (4620 MW), Maharashtra (3300 MW), Karnataka (1200 MW), Rajasthan (1320 MW), Madhya Pradesh (1200 MW), and Chhattisgarh (1970 MW). It also has a 40 MW solar power plant in Gujarat.
In terms of output, the Company accounted for 5% of India’s total power generation from thermal power plants and 15% of all the power generated by private sector thermal power plants as of March 31, 2022.
78% of the Co’s gross capacity has been secured by long-term power purchase agreements as of FY22 enabling revenue visibility, the average life of the PPAs was 17.5 years at the close of FY22.
If we see the past 4 years Sales & Net Profit data it can be concluded that it has been profitable since last 2 years only but revenue is having a good CAGR. The current debt to equity ratio of the company is 12.6, not a healthy one.
Technical Analysis In the second week of January, 100 Day MA crossed 200 Day MA, considered a bullish signal. Based on this, plus the announcement of PM Gati-Shakti, I entered this company on 1st February 2022 @ Rs. 111/share. According to Fibonacci Levels, the stock price is going up healthily with proper retracements and profit booking.
Rs. 250 is a significant Support level and is currently my stop-loss. Ideally, trailing stop loss should be kept at Rs.340 However, after a 300%+ move in less than seven months, it would make sense if there is some consolidation at a higher level.