Domestic brokerage firm Motilal Oswal is optimistic about the power sector, highlighting a consumption growth trend similar to China’s in the early 2000s.
Electricity consumption in India is expected to grow at an annual rate of over 7% over the next decade, driven by robust GDP growth, the rise of electric vehicles (EVs), and expanding data centers.
By 2035, it’s projected that one-third of electricity demand will come from these sectors, with data center capacity potentially growing at 30% annually.
Investment Opportunities in the Power Sector
Analysts indicate a potential investment opportunity exceeding Rs 40 lakh crore in the power sector due to increasing demand, infrastructure modernization, and a shift to clean energy sources.
India aims to achieve 500 GW of renewable energy capacity by 2030, prompting Motilal Oswal to recommend several stocks for investment while issuing neutral ratings on others.
Top Picks: PowerGrid, JSW Energy, and Tata Power
The brokerage has initiated coverage with buy ratings on PowerGrid, JSW Energy, and Tata Power:
PowerGrid: Expected to spend Rs 2 lakh crore on capital expenditure, enhancing its growth prospects.
JSW Energy: Anticipated to expand its capacity by 2.4 times in the next two and a half years, reaching 20 GW before 2030.
Tata Power: Plans to allocate 45% of its capital expenditure to renewable energy projects from FY 2023-27, potentially increasing its core earnings from 40% to 90%.
The target prices set for these stocks are Rs 425 for PowerGrid, Rs 917 for JSW Energy, and Rs 530 for Tata Power.
Neutral Ratings for NTPC and IEX
Motilal Oswal has issued neutral ratings for NTPC and IEX:
NTPC: Limited upside potential due to its subsidiary, NTPC Green Energy, preparing for a Rs 10,000 crore IPO, which may divert investor interest.
IEX: Despite a strong growth outlook from long-term contracts and a projected 4% volume increase, its market position may weaken with the potential implementation of market coupling, which could unify electricity pricing across exchanges.
The target prices for IEX and NTPC are set at Rs 226 and Rs 450, respectively.
