Decent growth in electricity consumption and generation along with increased capacity are likely to be reflected in the Q4 earnings of Indian power companies.
Elara Securities said the power companies it covers will report better performance in the three months ended March as the momentum in generation continues.
“Demand is likely to surge in the next six-seven months, with the onset of summers and good prospects for manufacturing growth,” Elara said.
The brokerage likes power companies because regulatory support for utilities that own renewable energy capacity and storage is very constructive across India, which provides a multi-year path for growth.
Electricity demand in the country is expected to touch about 230 gigawatts, an all-time record, this summer. The government has said sufficient coal stocks and gas capacities have been tied up and there won’t be any issues during peak power demand.
India’s power consumption grew by 7 percent YoY in Q4 of FY23, supported by strong growth of 13 percent/9 percent in the first two months, which offsets the 1 percent YoY decline in March 2023, said Sharekhan by BNP Paribas.
“We expect PSU power companies like NTPC/Power Grid to post decent adjusted PAT growth of 5 percent/9 percent YoY during the quarter,” it said.
Growth in NTPC, the country’s largest electricity generator, would be driven by expansion of power generation and commercialisation of new capacities, the brokerage said. Modest asset capitalisation would drive Power Grid’s earnings growth, the brokerage firm said.
Elara Securities expects Power Grid Corporation of India, the largest transmission utility, to post higher growth on increased capacity.
Sharekhan expects Tata Power to report strong earnings growth on a YoY basis due to a low base last year, although sequentially, net profit would decline due to losses at its 4,000 MW Mundra plant, which was operational for a few days in the March quarter, and moderation in coal realisation.
Analysts pointed out that better contribution from the renewable segment will support the Tata Group company’s earnings. Tata Power has a generation capacity of 14,076 MW of which 37 percent comes from clean energy sources.
“We expect higher losses from Mundra, as the plant was barely operational during 4QFY23,” Kotak Institutional Equities said about Tata Power. “Coal mining profits to moderate sequentially due to softness in realisations.”
However, the brokerage firm expects earnings from the renewable portfolio benefiting from a higher capacity base and strong execution at Tata Power Solar.
The market will monitor the NTPC management’s commentary on commercial capacity addition and the timeline for the monetisation of stake in the renewable asset subsidiary. The company’s installed capacity, including that of joint ventures and subsidiaries, is 71,644 MW.
Power Grid’s focus on new business avenues such as smart metering and capital expenditure guidance would also be tracked, according to analysts.
Elara Securities said JSW Energy, a power producer, and CESC, the sole distributor of electricity within Kolkata and its neighbourhood, may post moderate growth, while better offtake could drive Coal India to post strong March quarter numbers.
A drop in volumes in the short-term electricity market could result in the Indian Energy Exchange reporting dull earnings.