Anuj Upadhyay, Institutional Research Analyst, HDFC Securities and Hinal Choudhary, Institutional Research Analyst, HDFC Securities.
Our power universe is expected to report a strong 25.3% YoY earnings growth, owing to higher-than-expected power demand in Q1FY23 and overall improved merchant realisations. Revenue for our coverage universe is likely to improve by 12.3% YoY. The surge in demand along with the high price of imported coal and domestic supply constraints had impacted the coal inventory at power plants, which led to almost 71 plants operating at low inventory levels. This caused a steep rise in power deficit, eventually resulting in a significant rise in merchant rates in the Apr-June 2022 period. As a result, we remain positive on regulated entities like NTPC, CESC and NHPC, they are trading at a comfortable valuation and expected to see improved PLF, given strong power demand.
NTPC: Generation is expected to report a strong growth of 19.8% YoY to 79.8bus, led by strong demand recovery during peak summer and low YoY base. Realisation is expected to rise 5.1% YoY, led by a rise in fuel cost, which would boost the topline by 26% YoY and PAT by 33% YoY. We expect 833 MW of capacity addition (coal-660MW and solar-173 MW) in Q1FY23.
Powergrid: Capitalisation is expected to be at INR25bn (-56% YoY on a high base), while Capex is expected to be INR18.5bn (+67% YoY) in Q1FY23. The company capitalised assets worth INR207bn in FY22 and we expect it to capitalise assets worth INR120bn in FY23. We expect PGCIL's revenue to grow by 4% YoY to INR101.7bn, while PAT is expected to increase 18.7% YoY to INR38.9bn on a low YoY base.
Tata Power: Revenue is expected to grow by 21.6% YoY to INR123bn, led by improved generation at the Mundra plant, higher power demand across its distribution circles and executions across its solar EPC segment. PAT is expected to grow by 53% YoY to INR6.0bn, largely due to a fall in underrecovery across its Mundra station and higher profitability across its Indonesian coal business, led by a record rise in coal prices.
CESC: Standalone revenue is expected to increase by 13.2% YoY to INR21.9bn on the back of increased demand, aided by peak summer and lower YoY base. Accordingly, we expect PAT to increase 33.2% YoY to INR1.8bn. Generation across Chandrapur and Haldia has increased marginally YoY. The three-year medium-term PPA with the Railway Energy Management Co (REMCL) to supply 210 MW of power from its Dhariwal project at a tariff of INR4.1/unit has begun, which should boost consolidated earnings, going ahead.
JSW Energy: JSW Energy is expected to report a flat YoY PAT in Q1, led by lower generation, partially offset by higher realisation. Overall, generation is expected to decline 18% YoY to 4.5bn units in Q1FY23 led due to nil generation at the Ratnagiri station. However, Vijayanagar/hydro stations are expected to report strong generation growth of 51/10% YoY. Revenue is expected to decline by 13.3% YoY to INR15bn, while PAT is expected to be flat at INR2.1bn.
Torrent Power: Revenue is expected to grow 21% YoY to INR37.5bn and adjusted PAT is likely to grow 28.6% YoY to INR3.2bn, led by higher power demand. Overall generation, however, declined by 43.7% YoY as Torrent opted to procure power from external sources rather than generate it with unviable RLNG prices. Losses at Kalwa, Shilphata, and Mumbra are expected to abate.
NHPC: It is expected to report a 13.7% YoY rise in revenue, led by a 10.6% YoY rise in generation, which is driven by higher water availability and improved demand. PAT is expected to increase 11% YoY to INR10.1bn. Key aspects to watch out for: (1) progress in Parbati II and Subansiri projects; (2) outstanding dues across discoms.