According to international firm Jefferies, coal stocks at power plants are at a comfortable level, and imported coal plants have been given a pass-through on increased import prices. NTPC’s pricey gas plants have also been given the go-ahead for utilisation ramp up if power demand is higher. The brokerage is confident that by taking early measures, most of the high summer demand will be satisfied until it returns to normal in July after the monsoon.
According to Jefferies, the power companies NTPC (Buy), JSW Energy (Buy), and IEX (Underperform) benefit from this peak demand pocket. The firm has Buy tags on Power Grid with a target price of 260, JSW Energy with a target price of 315, and NTPC with a target price of 195; it has Underperform tags on the Indian Energy Exchange or IEX with a target price of 110 and Tata Power with a target price of 175 nevertheless.
“If it receives incentives for greater plant utilisation levels, NTPC could anticipate an increase in EPS of 3-5% for FY24E. The main foundation for generation capacity outside of solar PPAs with a 25-year fixed tariff is regulated ROE. 13% of JSW Energy’s capacity, which is totally dependent on imported coal, is available for sale. Prices for merchant power are presently Rs6 per unit. It indicated that a 5% change in this price might increase EPS by 5-8% in the FY24E.
Peak power demand deficits are currently thought to be a passing occurrence, although they are being attentively observed. Game-changing distribution reform appears to be on hold until the elections in May 2024. We are optimistic about Power Grid and think T&D spend, which has trailed behind generation, will increase in 2023 “said the note.
In 2022, high summer temperatures caused shortages, which the Government is already planning for. Domestic coal stockpiles are at 11 days, which is more than the typical level of 9. Coal plants have been told to start doing maintenance beforehand. According to analysts, imported coal plants should operate at full capacity beginning on March 16.
“With Gail keeping the necessary gas supplies prepared, NTPC expects to run 5 GW of gas-based capacity and to utilise an additional 4 GW as needed. There will be an extra 2.9 GW of coal capacity available. Together, these will increase India’s potential to generate power by 3–5% “Jefferies stated.
Disclaimer: The opinions and suggestions listed above are not Currency veda’s rather, they represent the opinions of certain analysts or brokerage firms.
