In a note on the utility sector, JM Financial noted that continued healthy power demand, uncertainty around coal prices, declining solar module and RLNG prices and revival in thermal capex (93GW by FY32E) were some of the common issues discussed by the CEOs during their March quarter conference calls. With the government anticipating a peak power demand of 256 GW in FY24, it expects utilities to continue report superior performance in the coming quarter.
JM Financial said deep dived into the commentaries of Adani Green Energy Ltd, Adani Power Ltd, BHEL Ltd, CESC Ltd, Coal India Ltd, JSW Energy Ltd, NHPC Ltd, NTPC Ltd, SJVN Ltd, Suzlon Energy Ltd and Tata Power Ltd, among others to read minds of the CEOs for assessing the contours of power demand, fuel prices, capacity additions and dichotomy of growth and sustainability.
The key takeaways included the understanding that power demand may remain healthy with the government also anticipating a peak power demand of 256.53 GW in FY25 (peak power demand was 240GW in FY24 against the government’s projection of 230GW). JM Financial said hydropower generation is below expectations due to deviation in the snow fall pattern, which is likely to continue in coming quarters also.
Driven by power demand and limited contribution from non-thermal sources, utilisation of thermal power plants is increasing and all the utilities expect a similar momentum to continue for thermal power generation.
“Tariff for merchant power on exchanges continue to remain elevated driven by healthy growth in power demand and limited incremental supplies,” it said adding coal prices are stable for now but the trajectory remains uncertain, with Coal India indicating 40-50 per cent decline in premium while Tata Power expecting stable prices.
Visibility of new thermal power projects is improving with the government targeting to add 93,380MW of thermal capacity by FY32. NTPC guided for 16.8 GW of new thermal projects award in the short to medium term, JM Financial noted.
“We also believe that capacity addition for new thermal power plants and renewables (solar and wind) will see huge traction in the coming years driven by burgeoning power demand and limited incremental supply. We currently have a BUY rating on NTPC (target price: Rs 368), Power Grid (target price: Rs 312), Coal India (target price: 500), Tata Power (target price: Rs 439), JSW Energy (target: Rs 540), NHPC (target: Rs 91) and Suzlon Energy (target: Rs 54),” JM Financial said according to the reports published in www.businesstoday.in .
JM Financial suggested a target price of Rs 243 on BHEL. The brokerage has ‘HOLD’ rating on CESC with a target of Rs 130), and a ‘Sell’ rating with target of Rs 72 on SJVN and Rs 800 on Torrent Power.
