JM Financial has maintained its 'ADD' rating on Adani Green Energy Ltd (AGEL) after the company reported in-line results for the second quarter of FY27. The domestic brokerage also has a 'BUY' rating on Adani Energy Solutions Ltd (formerly known as Adani Transmission Ltd), citing its valuation approach for the transmission and smart metering businesses.

AGEL's power supply EBITDA margin improved to 91 per cent in Q2 FY27, compared with 87 per cent in Q2 FY26 and 90 per cent in Q1 FY27. The margin was also above JM Financial's estimate of 89 per cent, supported by higher merchant sales.

The company added 621 MW of renewable energy (RE) capacity during the quarter, compared with 864 MW in Q2 FY26 and 848 MW in Q1 FY27. Its total renewable energy capacity addition stood at 1.5 GW in the first half of FY27.

AGEL also added 3,081 MWh of battery energy storage system (BESS) capacity in Q2 FY27, up from 2,175 MWh in the preceding quarter. This took its total BESS capacity to 6.6 GWh. The company is confident of increasing this capacity to more than 10 GWh by March 2027.

During the earnings conference call, the management reiterated its renewable energy capacity addition guidance of 4.5-5 GW, while acknowledging the risk of delays in transmission lines.

AGEL has structured 72 per cent of its project loans at fixed interest rates for three to five years. According to JM Financial, the company believes this effectively hedges its exposure against the anticipated interest rate hike cycle.

"Given the unfavourable macros for RE and possibility of interest rate hikes, we maintain ADD on the stock with a (12-month) TP (target price) of Rs 1,356," JM Financial said. The target price implied an upside potential of 8.5 per cent from the brokerage's assessed market price of Rs 1,250.

Adani Energy Solutions reported revenue of Rs 10,100 crore in Q2 FY27, up 53 per cent year-on-year (YoY) and 4 per cent quarter-on-quarter (QoQ). The revenue was 3 per cent above JM Financial's estimate and 4 per cent higher than consensus estimates.

However, EBITDA margin contracted to 31 per cent, down 393 basis points (bos) YoY and 20 bps QoQ. The margin was also below JM Financial's estimate of 33.93 per cent and the consensus estimate of 32.88 per cent.

Revenue from the energy solutions and power distribution (ESP) segment increased 19 per cent QoQ to Rs 2,200 crore, while its EBITDA margin improved to 37 per cent from 32 per cent in Q1 FY27.

Distribution losses stood at 3.3 per cent in Q2 FY27, compared with 5.2 per cent in Q1 FY27. Adani Electricity Mumbai Ltd's (AEML) regulatory asset base (RAB) stood at Rs 10,500 crore, up 11 per cent YoY.

Meanwhile, the transmission segment's EBITDA margin contracted to 91.7 per cent from 92.5 per cent in Q1 FY27 and 93.2 per cent in Q2 FY26.

The company installed 1.4 million smart meters during the quarter, compared with 2 million in Q1 FY27, taking total smart meter installations to 14.8 million.

JM Financial has maintained its 'BUY' rating on Adani Energy Solutions, valuing its transmission and smart metering businesses at 16x and 12x September 2028 estimated EBITDA, respectively.

It has retained its 12-month target price of Rs 1,728, implying a potential upside of 33.4 per cent from the assessed market price of Rs 1,295.