JM Financial has shared target prices for select power stocks including Tata Power Company Ltd, JSW Energy Ltd, NTPC Ltd, SJVN Ltd, and Torrent Power Ltd as the brokerage firm believes that these stocks shall reap the benefits of rising demand in FY26 as the recent slowdown in the power demand is a one-off, not a structural issue.
Demand for power, both energy and peak power, in India has been growing at an unprecedented level of 8.5% in recent years for FY 21-24. Peak demand touched 250GW on May 30, 2024. However, during 10MFY25, demand was subdued with energy/peak growing a meagre 3.6% YoY/ 2.3% YoY, it said.
Overall, 1,625BU of electricity was supplied during FY23 by utilities with domestic/commercial/industry/agriculture accounting for 28%/9%/33%/19%. Six states (Maharashtra, Gujarat, Uttar Pradesh, Tamil Nadu, Rajasthan and Madhya Pradesh) account for more than 50% of power consumption in India, said JM.
Rainfall in 2024 was 104% of long-period average (LPA), mostly in South Peninsular and Central India, affecting demand in Rajasthan, Madhya Pradesh, Karnataka and Telangana. Energy-intensive industries account for over 50% of industrial power consumption. During 9MFY25, production of fertilisers and cement has been almost stagnant.
"Electricity consumption in Indian homes has almost doubled during the last decade. Since 2017, 215 million households have been provided electricity connections. Domestic consumers are driving almost half of the power consumed in West Bengal, Bihar, Jharkhand and Uttar Pradesh where there is consistent demand growth, which is highly sensitive to weather," JM said.
January 2024 was the third-warmest month on record in India, with average mean temperature of 18.9°C, and the fourth-driest since 1901, making it one of the most arid winter months in recent history. India has witnessed 72% below-normal rainfall, particularly in northern India, while both maximum and minimum temperatures have been above average in 2025 till February 19, said the brokerage firm.
There is high probability of higher power demand from irrigation during the ensuing wheat and, then, paddy sowing seasons. As per our analysis of FY23-25, around 10% of power demand in India is sensitive to rainfall. We estimate energy/peak power demand to grow to 1,828BU/ 270GW at 7.5%/8.0% during FY26, which is also in alignment with estimates.
"Within our coverage universe, we have a 'buy' ratings on JSW Energy (target price: Rs 659), NTPC (target price: Rs 359), Tata Power (target price: Rs 456) and Torrent Power (target price: 1,593), which will directly benefit from traction in demand. We maintain a 'hold' rating on Coal India Ltd (target price: Rs 362) and a 'sell' rating on SJVN Ltd (target price: Rs 67)," JM Financial said.