Buy, Sell, or Hold? What to Do with Power Stocks Like NTPC, JSW Energy, and Power Grid Before Q1 Results?

Today in the Stock Market: Power stocks like NTPC Ltd, Power Grid Corporation of India Ltd, JSW Energy Ltd, Torrent Power, GVK Power and Infrastructure, and BHEL have been in the spotlight due to strong demand for electricity. Over the past year, Power Grid Corporation shares have surged by 90%, while other power stocks like NTPC, JSW Energy, Torrent Power, GVK Power, and BHEL have delivered impressive returns, with gains of up to 270%.

Investor and analyst confidence in these companies remains high due to rising power demand and improved earnings outlook. In the April-June 2024 quarter, Elara Securities analysts expect utility companies to report 6% year-over-year revenue growth and a 2% increase in earnings before interest, tax, depreciation, and amortization (EBITDA). Net profit is expected to rise by 5%, despite a high base from last year.

According to Elara analysts, NTPC and Power Grid Corporation are expected to have a strong quarter due to assured returns on regulated assets. Power generation grew by 11% year-over-year to 490 billion units in Q1FY25, driven by a severe heatwave affecting many regions.

In May, peak power demand hit a record high of 250GW, a 13% year-over-year increase, surpassing the previous peak demand of 243GW recorded in September 2023. The Central Electricity Authority (CEA) expects peak demand to reach 260GW in FY25.

Jefferies India Ltd noted that power demand in June 2024 grew by 8% year-over-year, with Q1FY25 power demand rising 11% year-over-year, surpassing their 7% growth estimate for FY25.

Jefferies’ top picks in the utilities sector are NTPC, JSW Energy, and Power Grid. SJVN is also expected to benefit from improved hydro generation, which will be in focus during the current July-September quarter, thanks to the monsoon season.

Persistent exchange volume momentum will benefit India Energy Exchange (IEX), and robust gas-based power demand will drive earnings for companies like Torrent Power.

Elara analysts remain optimistic about the industry’s growth due to ongoing policy changes and new initiatives under Modi 3.0. The industry is expected to continue growing with increased capacity addition, rising power consumption, and the introduction of green hydrogen and storage solutions.