Adani Green Energy Stock Analysis - Fundamental Analysis of Adani Green Share and Latest News - YouTube

High returns come with increased risk. If we reverse this line, i.e., does high risk always means high return? I will slightly disagree on this point with you guys.

Always taking more risk will not give more return But if you want more returns taking more risk is essential. I am discussing these pointers as retail investors make mistakes by investing in risky assets to get higher returns.

In order to make more returns, there are chances of losing the normal 8-10% return on assets on some good stocks or assets. This means that apart from losing their principal money sometimes, they also invest in companies where all their money is lost.

This was a learning part as in recent times you might have lost your money.

This learning is quite important. Now let's move towards today's video. I will talk about a company that could have provided you with high returns in response to high risk. And the name of the company is Adani Greens.

You might have heard about it as its share price is currently trading for more than Rs.1000. Besides, it has given a 1000% return to its investors.

You might be surprised to hear this. But it is a fact that this company has given a high return to its investors. But, now the question is whether I should invest in this company or exit after making 1000% returns.

In this video, we will talk about different facts and fundamental analysis of Adani Greens. This will aid the investment strategy of both old and potential investors.

Now let's begin a discussion on the fundamental analysis of Adani Greens. I, Jagdeep Singh, welcome you to the Groww youtube channel.

Let's start today's video. If you have not subscribed to Groww's Youtube channel, then surely do it. We bring videos that can help you in becoming an intelligent investor.

Let's talk about Adani Greens.

Adani Green's business is quite simple to understand. You might have heard about renewable energy. It is generating and renewing energy through sources without the creation of pollution.

Renewable energy is generated through solar or wind power. Adani Greens works in this sector. This sector will perform remarkably well in the future due to emerging concerns of pollution.

This sector has performed well even in the past times. This company's positive performance chances are due to industry potential and government focus on fulfilling India's energy requirement through renewable energy.

This will help in conserving the environment and fulfillment of energy needs. The government’s objective is to generate 175 gigawatts of energy by 2022 through renewable sources.

It means that 175 gigawatts of energy will emerge from solar or wind energy. Out of the total target, the government aims to generate100 gigawatts of energy through solar power.

This will help you in understanding the government's objective. To measure the company's growth, one needs to understand the current renewable energy generation.

Presently, out of 90 gigawatts, about 37 gigawatts of energy is generated through the solar sector. This figure can rise to 175 gigawatts by 2022 as per the government's objective.

Here, the growth potential can be high on the compounded annual rate in ensuing times. Presently out of 90 gigawatts, about 37 gigawatts of energy is generated through the solar sector.

This figure is initiated to touch 100 gigawatts, i.e., 3 times the old figure. Growth in the renewable sector favors this company as it is a part of this industry.

In recent times, this company has witnessed a direct benefit from growth in the renewable sector. It has made expansions internationally as well. The growth of the sector and business has reflected directly on its share price.

You would have received high returns by investing in its stock. Now let's talk about the past as well as projected growth and trends in numbers.

I have taken these numbers from the annual report of Adani Greens, which can be projected to the investors.

India's renewable energy installed capacity has a historical CAGR of 17% from March 2016-20. A CAGR of 17% is really commendable.

However, for March 2020-30, the projected CAGR is 18%. This means that by March 2022 and 2030, the installed capacity has chances to reach 175 and 450 gigawatts, respectively.

Now after conversing on the sector growth, let’s talk about the company's growth. Let me address the growth of Adani Greens in response to the industry growth.

I will now take you to my screen. Here you can view the installed capacity of Adani Greens from March 2016-20.

Its installed capacity has risen from 0.3 in March 2016 to 2.5 in March 2020. This depicts that the company's march 2020 growth through CAGR has been 67%.

A 67% CAGR growth every year is highly laudatory. However, the company's projected growth from March 2020 to 2025 is 60%. After an appreciative past growth trend, it has prospects of high growth in the future as well.

So, friends, I hope you must have understood the sector's growth and the company's projected prospects till now.

The chances of growth of the industry are seemingly high. Now let's talk of its annual performances, i.e., its Balance sheet, P&L statement, and shareholding pattern.

This will help in identifying red flags that are important for the research by an investor.

Let's first talk about the shareholding pattern, i.e., the stake held by promoters. I will now take you to my screen.

Out of the total ownership, the company's Promoters hold 74.92% as a stake. While the Foreign institutional investors have a stake of 22.4%.

The major stake of the company is held either by the Promoters and Foreign institutional investors. Here you also need to take into consideration whether the promoters have pledged their stake or not.

In the former times, promoters of Adani Greens had pledged its stake. In September 2019, out of the total promoter's stake, 42% was pledged. This figure of pledge percentage is quite huge.

But in recent times, the company has reduced the pledge percentage of promoters. Current shares pledged stand at 6.7% of the entire holding.

This shows that pledging has reduced massively in recent times. This can be considered as a positive point as the company performed better. The promoters reduced their pledge on share due to virtuous company performance and share price.

Now let us talk about the company's P&L statement. Its net revenue is exponentially rising, which is a positive point.

The operating profit margin in the recent quarter was above 60%. This is also a positive remark for the company.

However, I noticed an interesting thing while viewing the company's P&L statement. Its depreciation figure has fallen by massive amounts.

It shows the amount deducted from the assets and reduced from the P&L statement.

In simple words, high depreciation leads to low profits and vice versa. After deeper research, I found out that the company has changed its method of charging depreciation.

Following this, the company's depreciation has fallen by great amounts. Hence a jump in the net profits has been seen.

It is important to view the operating profit instead of net profit to compare with former years. Due to low depreciation, the company has converted from a loss to a profit-making company.

The business of renewable energy is quite assets heavy. A lot of assets like land are bought to create energy. Over here, changing depreciation has different opinions, and I leave its comprehension to you.

However, I will discuss an intricate fact on the company's change in depreciation and its quarterly profit.

The reason behind the company's profit is a reduction in depreciation. As a retail investor, you should notice this and research it.

Now, let's move to the Balance Sheet. Here I found an important thing for an investor. The company has a huge/significantly high debt amount.

It will be interesting to see how the company manages its debt amount. Here the two things of concern are the high debt level and its significant rise in recent times.

You should focus and research on this to know the reasons behind it. One reason is that to expand and purchase assets, the company has to raise the debt.

A significant problem with high debt is an increase in the interest cost. The repayment of debt and interest inhibits the company's ability to earn profits.

The outcome of this case will be available in the ensuing time. The debt amount of Adani Greens needs to be kept under focus and needs timely maintenance.

This is an important thing for you as an investor. Hence I mentioned it.

So this was the discussion on the company's financials. To decide your investment path, you should do detailed research on the intricate things mentioned by me.

Here three things are quite important. The first is the sector's growth potential. Second is the growth shown by the company in the past and its remarkable projected growth.

Its growth is significantly good. The third important factor is related to the main features seen in the company's Balance sheet and P&L statement, which need focus while making an investment.

There are two pointers on which I will do an investigation before investing. The first one is the shift of the company from a loss-making to earning profits entity.

Next is the growth potential of the company. To achieve exponential growth, companies sometimes raise debt. But they are not able to service it.

In this case, the company's management of the debt to unlock its growth potential should be studied. If the debt is rightly managed, then interest cost will fall while the profitability rises.

This will have a direct impact on the share price of the company. But making an investment without researching this is not be a great idea.

So, friends, I hope that you liked today's video. If you liked it, then press the like button.

Keep supporting us. In the ensuing time, we will make more such videos to help you in becoming an intelligent investor.

Comment below your views on investment in Adani Greens. You can also discuss the red flags mentioned so that the viewers can learn from your comments.

I hope that the upcoming investing session is virtuous for you. Happy investing!