HDFC Securities has said in a note that “Our power universe is expected to report a strong 25.3% YoY earnings growth, owing to higher-than-expected power demand in Q1FY23 and overall improved merchant realisations. Revenue for our coverage universe is likely to improve by 12.3% YoY. The surge in demand along with the high price of imported coal and domestic supply constraints had impacted the coal inventory at power plants, which led to almost 71 plants operating at low inventory levels. This caused a steep rise in power deficit, eventually resulting in a significant rise in merchant rates in the Apr-June 2022 period. As a result, we remain positive on regulated entities like NTPC, CESC and NHPC, they are trading at a comfortable valuation and expected to see improved PLF, given strong power demand."
With a buy call for NTPC, the brokerage has said “Generation is expected to report a strong growth of 19.8% YoY to 79.8bus, led by strong demand recovery during peak summer and low YoY base. Realisation is expected to rise 5.1% YoY, led by a rise in fuel cost, which would boost the topline by 26% YoY and PAT by 33% YoY. We expect 833 MW of capacity addition (coal–660MW and solar–173 MW) in Q1FY23."
With a buy rating for CESC, HDFC Securities has said “Standalone revenue is expected to increase by 13.2% YoY to INR21.9bn on the back of increased demand, aided by peak summer and lower YoY base. Accordingly, we expect PAT to increase 33.2% YoY to INR1.8bn. Generation across Chandrapur and Haldia has increased marginally YoY. The three-year medium-term PPA with the Railway Energy Management Co (REMCL) to supply 210 MW of power from its Dhariwal project at a tariff of INR4.1/unit has begun, which should boost consolidated earnings, going ahead."
And with a recommendation to buy the shares of NHPC, the brokerage has claimed that “It is expected to report a 13.7% YoY rise in revenue, led by a 10.6% YoY rise in generation, which is driven by higher water availability and improved demand. PAT is expected to increase 11% YoY to INR10.1bn. Key aspects to watch out for: (1) progress in Parbati II and Subansiri projects; (2) outstanding dues across discoms."
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
