Power Stocks to Buy: Nomura Gives ‘Buy’ Tag to Tata Power & JSW Energy with Up to 22% Upside Potential

Nomura, a global brokerage, has recommended buying shares of Tata Power and JSW Energy, expecting them to grow significantly in the coming years. In a report on India’s power sector, Nomura set target prices of ₹560 for Tata Power and ₹885 for JSW Energy. The brokerage believes India’s power sector is poised for major growth, especially with the shift from conventional energy to green energy.

Growth Potential for Tata Power and JSW Energy

Nomura expects Tata Power and JSW Energy to see strong earnings growth. Tata Power is projected to achieve a 16% compound annual growth rate (CAGR) in earnings before interest, taxes, depreciation, and amortization (EBITDA) from FY24 to FY27, while JSW Energy could grow by 38% CAGR in the same period. This is due to the companies’ expanding capacities, particularly in the renewable energy sector.

ADVERTISEMENT

Be part of our community by downloading and registering on the Angel One app. Your support helps us keep delivering quality content.

Strong Outlook for India’s Energy Demand

Nomura anticipates that India’s energy demand will grow faster over the next five years, creating opportunities across the entire energy value chain. This includes areas like solar module manufacturing, renewable energy generation, and transmission and distribution. The brokerage expects solar and wind energy to supply 75% of the additional energy demand by FY25, with renewables projected to account for 35% of India’s electricity by then, compared to 33.5% in FY24.

Key Drivers of Energy Growth

Nomura identifies three main factors that will drive energy demand in India:

1. Data Centres: The increasing number of data centres will require more power.
2. Electric Vehicles (EVs): The growing use of EVs will boost electricity consumption.
3. Green Hydrogen: Nomura predicts green hydrogen will become a major contributor, potentially driving demand for 150-300TWh of electricity.

Tata Power

Tata Power, India’s largest integrated power company, is expected to benefit from the country’s shift to renewable energy. The company has a 5.5GW renewable energy pipeline and aims to grow its renewable energy portfolio to 4.5GW. Tata Power is also building an electric vehicle (EV) charging network with over 5,500 charging points and is working on pumped storage projects with an initial capacity of 2.8GW. The company’s target is to generate 70% of its power from renewables by FY30 and phase out thermal power by 2045.

On Wednesday, Tata Power’s share price rose about 1% to ₹460.90 on the BSE.

JSW Energy

JSW Energy, one of India’s leading independent power producers, plans to reach 20GW of renewable energy capacity by FY30. The company currently has 7.54GW of installed capacity and 8.3GW of renewable energy in the pipeline. Around 92% of its installed capacity is under long-term power purchase agreements (PPAs), which provides strong earnings visibility. The company is also expanding into energy storage solutions, which are expected to contribute 95% of its EBITDA margin in the future.

On Wednesday, JSW Energy’s share price increased by 1% to ₹729.95 on the BSE.