Power Sector Stocks: Domestic brokerage firm Motilal Oswal is bullish on the power sector, forecasting strong growth in India’s electricity consumption. The firm believes that India’s power consumption trends mirror China’s growth trajectory in the early 2000s. According to the brokerage, electricity demand in India is expected to grow by over 7% annually over the next decade, driven by a robust GDP, the rise of electric vehicles (EVs), and increased data center usage. By 2035, one-third of the country’s electricity demand is projected to come solely from EVs and data centers. Data center capacity could grow at an annual rate of 30%, alongside the increasing demand for EVs.
Power Sector Investment Opportunities
Analysts predict that rising demand, the modernization of outdated infrastructure, and the shift towards clean energy sources will present investment opportunities exceeding ₹40 lakh crore in the power sector. India has set a target to achieve 500 GW of renewable energy capacity by 2030. Given this backdrop, the brokerage has assigned buy ratings to several stocks, although some stocks, despite showing strong growth potential, have been given neutral ratings.
Bullish on PowerGrid, JSW Energy, and Tata Power
Motilal Oswal has initiated coverage with buy ratings on PowerGrid, JSW Energy, and Tata Power. The brokerage sees significant potential in the transmission segment, where PowerGrid alone could undertake ₹2 lakh crore in capital expenditure, enhancing its growth prospects. JSW Energy also has strong growth potential, with its capacity expected to increase 2.4 times over the next two and a half years, and it aims to reach 20 GW capacity by 2030.
For Tata Power, the company plans to allocate 45% of its capital expenditure to renewable energy projects between FY2023-27. This shift could increase the company’s core earnings from 40% to 90%. The brokerage has set target prices of ₹425 for PowerGrid, ₹917 for JSW Energy, and ₹530 for Tata Power.
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Neutral Ratings for NTPC and IEX
Motilal Oswal has given neutral ratings to NTPC and IEX. For NTPC, analysts believe that growth prospects are limited, as the company’s subsidiary, NTPC Green Energy, is preparing to launch a ₹10,000 crore IPO, which could divert investor interest from NTPC towards its clean energy division.
As for IEX, its growth outlook looks strong, with the potential for 4% volume growth due to the launch of long-term contracts. However, its growth could be impacted if market coupling is implemented. Market coupling would integrate buy and sell bids across all power exchanges in the country, leading to a uniform Market Clearing Price (MCP). This could reduce IEX’s dominant market share. The brokerage has set target prices of ₹226 for IEX and ₹450 for NTPC.
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