Indian power stocks remained charged up for the third straight year on Dalal Street, citing fresh investment announcements and rising demand growth which rebounded to double-digits in November 2022. The ongoing rally in Adani group stocks further supported the sector.
Among the sectoral indices on the BSE, the BSE Power index rallied the most 32 per cent on a year-to-date basis till December 7, extending its rally to 139 per cent since December 2019. Market players are still bullish on select power stocks. They think that power demand may continue to surge over the next 6-7 months on the back of seasonality and general economic activity.
Top gainers
Shares of Adani Power have gained 225 per cent to Rs 324.35 on December 5, 2022 against Rs 99.75 on December 31, 2021. It was followed by Adani Transmission (up 58 per cent) and Adani Green Energy (up 53 per cent). Other power majors including NHPC, NTPC, ABB India, Power Grid and Tata Power advanced somewhere between 2 per cent and 39 per cent during the same period.
Outlook
According to Emkay Global Financial Services, PMI manufacturing clearly shows strong manufacturing activity and, hence, power demand growth would remain strong in the medium term. It further believes that companies with underutilised capacity would benefit as demand sees traction.
Emkay Global Financial Services has a ‘Buy’ rating on NTPC, NHPC and CESC with a target price of Rs 200, Rs 51 and Rs 101, respectively.
Of late, power companies, which are part of the BSE Power index, reported over 23 per cent year-on-year growth in consolidated net profit on a 32 per cent rise in gross sales.
Sharing his views on the power sector, Aditya Sood, Fund Manager, InCred Multicap Portfolio said, “The fortunes of the power sector are aligned to the fiscal spending that the centre and state governments budget. FY22 saw a very strong uptick in fresh investment announcements – around 78 per cent growth over FY21 across various sectors.”
He further added that the Centre has maintained its strong capital expenditure momentum. With the coal-based PLF running at 62 per cent, which is at a 5-year high, the private players are averse to adding coal-based capacities the focus is on adding renewable capacities.
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