On Tuesday, Jefferies, a global investment banking firm, announced the initiation of coverage on ADNOC Drilling Company PJSC (ADNOCDRILL:AD) with a Buy rating and set a price target of AED6.20. The firm highlighted the unique position of ADNOC Drilling as the exclusive provider of integrated drilling rig services to the ADNOC Group in Abu Dhabi.
These targets are expected to bolster the demand for drilling services, providing a favorable outlook for the company. The company's strong positioning is reflected in its impressive 25% revenue growth and 37% return on equity over the last twelve months.
ADNOC Drilling's stock trades at a premium, with an average 11 times forward EV/EBITDA for 2025/2026, compared to its peers' average of approximately 5 times. The premium is attributed to ADNOC Drilling's industry-leading EBITDA margins, which are close to 50%, and its contractual relationship with ADNOC Group, which ensures a clear visibility of cash flows.
In summary, Jefferies' initiation of coverage on ADNOC Drilling with a Buy rating reflects the firm's positive outlook on the company's financial health and strategic market position within the oil and gas industry, underpinned by its exclusive service provision to the ADNOC Group and the group's aggressive production and self-sufficiency goals.
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