Power stocks rally up to 100% in FY24. Should you chase the momentum?
power stocks have soared up to 100% in FY24. While the BSE Power index has gained 28% in the ongoing financial year, Adani Power has doubled in less than 6 months.
Shares of PSU Bharat Heavy Electricals Limited (BHEL), which manufactures power generation equipment, has grown 77% so far in FY24, while JSW Energy is also up 75%.
Investors are also paying attention to PSU utilities like NTPC and NHPC, which have given returns of 36% and 30% in FY24, as they look inexpensive and come with good dividend yields.
Peak deficit periods are on the rise, with current thermal utilisation close to an all-time high of 80%. India’s power demand spiked in August 2023 to 16% from 8% in July on the worst monsoon in 122 years (El Nino effect) resulting in heatwaves in west and south India.
October tends to see the highest power consumption after April-May, as warmer temperatures and the festive season drive residential demand and peak deficit is likely to be seen again, industry experts say.
«As India enters a phase of capex-driven GDP growth, power intensity should rise.
We expect annual thermal PLFs (plant load factor) to cross 80% by FY25E, above a two-decade peak. Power generation and T&D investments should rise 2.2x to $280 bn in FY24E-30E vs FY17-23,» Jefferies analyst Lavina Quadros said.
NTPC has already announced plans to raise thermal capacity addition and Adani Power is looking at scaling up capacity by 50% in the next five to seven years.
«Our power demand estimates of 7% CAGR in FY23-30E assume residential demand further rises to 29%+ of overall demand by FY30E.
