Gautam Adani group company, Adani Power (NSE: ADANIPOWER) rose over 30% in the last two months. The power company has gained significantly as the demand for electricity in India shoots up.
ADANIPOWER has grown remarkably in the last one year, with its weekly candle making higher highs each new week. The company broke its previous resistance of ₹417 and continued to trade higher.
In the last one year, while Nifty50 returned 46%, ADANIPOWER gained nearly 227%, an additional return of 116% for its investors compared to that of the Indian market. Similarly, Adani Power outperformed Sensex and the complete power sector too.
Shares of ADANIPOWER made a swing low of ₹289 in November 2023, and since then the stock has almost doubled making an all time high of ₹589. However, since December 2023, the thermal power company can be seen trading in a closed range, forming a channel pattern.
ADANIPOWER Swing Trading Plan
Adani Power is currently trading in a close range between ₹485 and ₹589, forming a channel pattern after the strong uptrend. Channel patterns or the ‘consolidation phase’ are usually a sign of indecision among investors. After the phase of consolidation, we can either see a further markup (up trend) or a decline in price, referred as the ‘distribution phase’
The current market price of ADANIPOWER is ₹555, which is near its 52 week high. If Adani Power manages to break out above the resistance of ₹583 supported by good volumes, along with a supportive market, I will look to initiate fresh long positions targeting ₹636.
However, if Adani Power fails to sustain the upside and corrects to lower levels, I will wait patiently for it to decline by around 15%. Later, when the stock trades near the 38.2% Fibonacci retracement level which is around ₹474, I will plan to go long again with a stop loss at ₹437 and target of ₹590. The 38.2% Fib level should act as a strong support zone.
Looking at the positive sentiment in the complete power sector, powered by increased Government spending towards the sector, my plan will be to either trade the breakout above ₹583 or alternatively, buying the dips near ₹474 if a pullback happens. Intraday traders can check important targets for Adani Power for tomorrow
Adani Power’s impeccable financial performance fueled its growth
Like Adani Power, the entire power sector experienced better profits, higher returns and increased demand for their products. ADANIPOWER’s profit after tax (PAT) margins grew by 27.7% in the year 2023. The company has also displayed increased quarterly sales from ₹7,764 crores in December 2022, to ₹12,991 crores in December 2023, a strong growth of 67.3% in just one year!
The Power Generator sector is trading at a price to earning (PE) of 25.78x, while Adani power is at a 9x PE. Investors might consider this as an undervaluation for the company leading to increase in demand for its shares which will eventually raise its share price.
Indian institutional investors (DII) are also very bullish on Adani Power, and have been raising their stake in this thermal power company. The company has also displayed an improved Return on Equity (ROE) of about 44.2%. All these factors, along with the highest demand in decades helped Adani grow its power company.
Important growth metrics of ADANIPOWER
| Metric | Percentage |
|---|---|
| Sales Growth | 32.37% |
| ROE (Return on Equity) | 43.89% |
| ROCE (Return on Capital Employed) | 17.84% |
| Profit Growth | 103.44% |
Final Words
ADANIPOWER has performed really well in the last few years, growing from ₹21 in 2020, to ₹580 in 2024, returning well over 2500%.
However, this is a relatively volatile stock like the rest of the Adani Stocks. When stocks are volatile, they make aggressive moves and are more susceptible to hit stop losses in small terms. Check out how Adani Power may perform by the year 2030 based on AI analysis.
Long term outlook still remains bullish, where smart investors can consider buy on dip strategies to accumulate.
