Adani Energy Solutions Analysis

dividend

Pros

• Dividends after 3 years are expected to be thoroughly covered by earnings (10.4x coverage).

Cons

• Unable to evaluate Adani Transmission's dividend yield against the bottom 25% of dividend payers as the company has not reported any payouts.
• Unable to evaluate Adani Transmission's dividend against the top 25% market benchmark as the company has not reported any payouts.

future

Pros

• Adani Transmission's earnings are expected to grow significantly at over 20% yearly.
• Adani Transmission's earnings growth is expected to exceed the India market average.
• Adani Transmission's earnings growth is expected to exceed the low risk savings rate of 7.2%.
• Adani Transmission's earnings are expected to exceed the low risk growth rate next year.
• Adani Transmission's earnings are expected to increase by more than the low risk growth rate in 3 years time.
• Adani Transmission's net income is expected to increase by more than 50% in 2 years time.
• Performance (ROE) is expected to be above the current IN Electric Utilities industry average.
• An improvement in Adani Transmission's performance (ROE) is expected over the next 3 years.

Cons

• Cash flow for Adani Transmission is expected to decrease over the next 2 years.
• Adani Transmission is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
• Adani Transmission's revenue is expected to increase but not above the 50% threshold in 2 years time.
• Adani Transmission's revenue is expected to grow by 4.9% yearly, however this is not considered high growth (20% yearly).
• Adani Transmission's revenue growth is positive but not above the India market average.

health

Pros

• Adani Transmission is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
• Adani Transmission is profitable, therefore cash runway is not a concern.
• Adani Transmission is profitable, therefore cash runway is not a concern.
• Debt is well covered by operating cash flow (22.4%, greater than 20% of total debt).
• The level of debt compared to net worth has been reduced over the past 5 years (885.9% vs 253.6% today).

Cons

• Debt is not covered by short term assets, assets are 0.3x debt.
• Adani Transmission's long term commitments exceed its cash and other short term assets.
• Interest payments on debt are not well covered by earnings (EBIT is 1.7x annual interest expense, ideally 3x coverage).
• Adani Transmission's level of debt (253.6%) compared to net worth is high (greater than 40%).
• High level of physical assets or inventory.

management

Pros

• The tenure for the Adani Transmission board of directors is about average.
• Anil's remuneration is about average for companies of similar size in India.
• Anil's compensation has been consistent with company performance over the past year, both up more than 20%.
• The tenure for the Adani Transmission management team is about average.

Cons

past

Pros

• Adani Transmission's 1-year earnings growth exceeds its 5-year average (41.2% vs 11.7%)
• Adani Transmission's year on year earnings growth rate has been positive over the past 5 years, however the most recent earnings are below average.
• Adani Transmission's earnings growth has exceeded the IN Electric Utilities industry average in the past year (41.2% vs 16.2%).

Cons

• Adani Transmission used its assets less efficiently than the IN Electric Utilities industry average last year based on Return on Assets.
• Adani Transmission's use of capital deteriorated last year versus 3 years ago (Return on Capital Employed).
• Adani Transmission has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).

value

Pros

• 539254 outperformed the Electric Utilities industry which returned -13.9% over the past year.
• 539254 outperformed the Market in India which returned -14.5% over the past year.
• BSE:539254 is up 8.4% outperforming the Electric Utilities industry which returned 5.5% over the past month.
• BSE:539254 is up 8.4% along with the India market (8%) over the past month.

Cons

• Adani Transmission's share price is below the future cash flow value, but not at a moderate discount (< 20%).
• Adani Transmission's share price is below the future cash flow value, but not at a substantial discount (< 40%).
• Adani Transmission is overvalued based on assets compared to the IN Electric Utilities industry average.
• Adani Transmission is poor value based on expected growth next year.
• Adani Transmission is overvalued based on earnings compared to the IN Electric Utilities industry average.
• Adani Transmission is overvalued based on earnings compared to the India market.