TotalEnergies Has Minimal Underlying Exposure To Short-Seller Target Adani Group, Analyst Expects 'Assuring Update'

In the wake of a short report targeting Adani investments last week, one analyst is diving into TotalEnergies SE's TTE risk exposure.

What Happened: Last week, Hindenburg Research published the results of a two-year investigation into Indian multinational holding company Adani Group. The short-seller report claimed that the company has engaged in "brazen stock manipulation and accounting fraud."

In a new note to clients on Tuesday, Bernstein pointed out that TotalEnergies holds significant stakes in three of Adani Group's companies. TotalEnergies has a 37.4% stake in Adani Total Gas, a 25% stake in Adani New Industries and a 19.7% stake in Adani Green Energy, per Bernstein.

Related Link: Indian Billionaire Adani Pulling 'Largest Con In Corporate History,' Says Short Seller: 'Companies Have 85% Downside' On Fundamentals

"We estimate that the invested capital across the three businesses is $3Bn today, with TTE's stakes in Adani Total Gas and Adani Green Energy worth $11.8Bn and $4.5Bn respectively at today's share prices," Bernstein analyst Oswald Clint said.

TotalEnergies generated approximately $40 million of net income in full-year 2022 as a result of its investments in Adani Group's companies, the analyst said, adding its stakes could generate approximately $500 million by 2027, but that's only a 1% contribution to the company's bottom line.

"We believe TOTAL's rigorous due diligence has been conducted when entering these investments aligned with all Indian laws, and that they're well-placed to create long-term value. Ultimately today, the earnings contribution is insignificant," Clint said.

The Bernstein analyst believes the risks are manageable for TotalEnergies and expects the company to provide an "assuring update" soon. 

As a result Bernstein reiterated its Outperform rating on the stock. The firm has a 12-month price target of $80 on shares.

Check This Out: Adani Isn't The First — Elon Musk's Twitter, Nikola And A Crypto Company Have Been Short-Selling Targets For Hindenburg Before

TTE Price Action: TotalEnergies has a 52-week high of $65.05 and a 52-week low of $44.61.

The stock is down 1.2% at $61.80 at the time of writing, according to Benzinga Pro.

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Photo: courtesy of TotalEnergies.