What does Adani Power do?
Adani Power is a coal based electric power generation company that has approximately 10,000 megawatts generation capacity.
Balance sheet analysis
- The company's average current ratio for the last three years is 0.58, and the industry's current ratio is 1.96. Current ratio of the company has not been increasing in the previous ten years. It means the company is not capable of paying its debt by selling its assets in the short term, which is a bad sign for a company.
- Average ROE for the last three years is -1.53, which is even lower than the industry's average i.e., -0.05. It means that the management is not effectively using its assets for generating profits.
|ROE over the last 5 years|
- Average debt-equity ratio over the previous three years is 27.8, which is much higher than the industry's average(1.86). Though the power sector is a capital intensive industry, 27 times debt to equity is a financial risk for the company. It means company won't be able to cover all outstanding debts in the event of a business downturn using shareholder's equity.
- Overall, the balance sheet of Adani Power is not good. The company is not able to manage their assets and liabilities well.
Income statement analysis
- Revenue and EBITDA are decreasing for the last five years, which is not a good sign for the sustainability of the company.
- EPS has been negative for the previous five years, which means Adani Power has been consistently losing money.
|EPS Over last 5 Years|
- Adani Power's income statement is not looking great in the previous 3-5 years, and it shows that the company is not currently profitable.
Cash flow statement analysis
- Operating cash flow to sales ratio has been positive and increasing over the last five years, which is a good sign for the company that it has been successfully turning its cash to sales.
- Cash from investing activities during the previous five years has been negative, which means the company is funding in its expansion. It is a good sign for the company.
- The company's free cash flow has been positive and has been increasing for the last five years. But, the owner's earnings are negative and have been decreasing over the same period, which is a bad sign for the growth of the company because the owner is losing cash over a while.
|Owner's earnings over last 5 years|
- Overall, Adani Power has a weak cash flow statement because the owner's earning has been cynical and decreasing in the last five years.
ValuationAccording to Stockylab, Adani Power's fair value/intrinsic value stands at Rs. 68.14 using different valuation methods while the company is trading at Rs. 38.15.
- The company is trading below its fair value, which is a good sign to buy, but its fundamentals(balance sheet, income statement, and cash flow statement) are not very strong.
- That's why Stockylab has a buy call with 72% confidence in the recommendation.
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