Adani Power Ltd is Rated Sell

Current Rating and Its Significance

MarketsMOJO’s current rating of Sell for Adani Power Ltd indicates a cautious stance towards the stock. This rating suggests that investors should consider reducing exposure or avoiding new purchases at present, based on a comprehensive evaluation of the company’s quality, valuation, financial health, and technical indicators. The rating was revised on 13 February 2026, reflecting a shift in the company’s overall assessment, but the detailed analysis below is grounded in the latest data available as of 27 February 2026.

Quality Assessment

As of 27 February 2026, Adani Power’s quality grade is assessed as average. This reflects a middling performance in key operational and profitability metrics. The company’s return on capital employed (ROCE) for the half-year stands at 16.7%, which is modest but not exceptional within the power sector. However, recent quarterly profit after tax (PAT) figures have declined by 17.6% compared to the previous four-quarter average, signalling some pressure on earnings quality. Additionally, the company’s ability to service debt remains a concern, with a high Debt to EBITDA ratio of 3.48 times, indicating elevated leverage and potential vulnerability to interest rate fluctuations or operational setbacks.

Valuation Considerations

Valuation is a critical factor in the current rating, with Adani Power classified as very expensive based on its financial metrics as of 27 February 2026. The stock trades at an enterprise value to capital employed ratio of 3.2, which is high relative to historical averages and peer valuations. Despite this, the stock price has delivered a strong 1-year return of 41.17%, reflecting market optimism or speculative interest. However, this price appreciation contrasts with a 12.2% decline in profits over the same period, suggesting that the valuation may not be fully supported by underlying earnings growth. Investors should be wary of paying a premium for a stock with deteriorating profitability and stretched valuation multiples.

Financial Trend Analysis

The financial trend for Adani Power is currently negative. The company’s debt-equity ratio has risen to 0.83 times, the highest in recent periods, indicating increased reliance on borrowed funds. This elevated leverage, combined with weakening profitability, raises concerns about financial stability and cash flow adequacy. The latest half-year ROCE of 17.69% is the lowest recorded in recent times, underscoring a decline in capital efficiency. These factors collectively weigh on the company’s financial health and contribute to the cautious rating.

Technical Outlook

From a technical perspective, Adani Power’s stock exhibits a mildly bullish trend as of 27 February 2026. The stock has posted a 4.42% gain over the past month and an 18.66% increase over six months, indicating some positive momentum. However, shorter-term movements have been mixed, with a 1-week decline of 1.54% and a year-to-date drop of 1.78%. The technical grade suggests that while there is some buying interest, it is not strong enough to offset the fundamental concerns. Investors relying solely on technical signals should remain cautious given the broader financial and valuation challenges.

Stock Performance Summary

As of 27 February 2026, Adani Power’s stock performance shows a mixed picture. The stock has delivered a robust 41.17% return over the past year, outperforming many peers in the power sector. However, shorter-term returns have been volatile, with a 5.26% decline over three months and a modest 4.42% gain in the last month. The 1-day change was negative at -0.67%, reflecting recent market pressures. This volatility, combined with the company’s financial and valuation challenges, supports the current cautious rating.

Implications for Investors

The Sell rating on Adani Power Ltd advises investors to approach the stock with caution. The combination of average quality, very expensive valuation, negative financial trends, and only mildly bullish technicals suggests that the stock may face headwinds in the near term. Investors should carefully consider their risk tolerance and investment horizon before holding or adding to positions in this stock. Those seeking exposure to the power sector might explore alternatives with stronger fundamentals and more attractive valuations.

Company Profile and Market Context

Adani Power Ltd is a large-cap company operating in the power sector. Its market capitalisation and sector positioning make it a significant player in India’s energy landscape. Despite its size, the company’s recent financial performance and valuation metrics have raised concerns among analysts and investors. The power sector itself faces challenges such as regulatory changes, fuel price volatility, and evolving demand patterns, which can impact companies like Adani Power.

Debt and Profitability Challenges

The company’s high Debt to EBITDA ratio of 3.48 times highlights a low ability to service debt comfortably. This elevated leverage increases financial risk, especially in a sector sensitive to interest rate movements and operational disruptions. The negative quarterly PAT of ₹2,479.58 crores, which has fallen by 17.6%, further emphasises the strain on profitability. The debt-equity ratio at 0.83 times is the highest recorded recently, signalling increased borrowing that may pressure future earnings and cash flows.

Valuation in Perspective

While the stock’s valuation is considered very expensive, it is trading at a discount compared to its peers’ average historical valuations. This nuance suggests that although the price multiples are stretched, there may be some relative value compared to sector benchmarks. Nonetheless, the disconnect between rising stock prices and falling profits warrants caution. Investors should weigh the premium valuation against the company’s deteriorating financial fundamentals.

Summary of Key Metrics as of 27 February 2026

To summarise, the key metrics shaping the current rating include:

• Mojo Score: 42.0 (Sell grade)
• Quality Grade: Average
• Valuation Grade: Very Expensive
• Financial Grade: Negative
• Technical Grade: Mildly Bullish
• Debt to EBITDA Ratio: 3.48 times
• ROCE (Half-Year): 16.7%
• PAT Quarterly: ₹2,479.58 crores, down 17.6%
• Debt-Equity Ratio: 0.83 times
• 1-Year Stock Return: +41.17%

These figures collectively inform the cautious stance reflected in the Sell rating, signalling that investors should carefully evaluate the risks before committing capital to Adani Power Ltd at this time.

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