Tata Power Ltd, REC Ltd, IREDA and Power Finance Corporation Ltd (PFC) are among seven stocks that domestic brokerage Elara Securities sees as major beneficiaries of Pradhan Mantri Suryodaya Yojana (PMSY). Others included Havells India Ltd, KEI Industries Ltd and APL Apollo. The new rooftop solar scheme, which is targeting 1 crore households, is expected to benefit manufacturers of solar panels, capital goods, structural steel pipes, and consumer durables & electrical companies as also power financing players.
Elara Securities estimate the total opportunity size for solar panels, based on the current announcement, to be 10GW, at total investment of Rs 55,400 crore. The brokerage said that upon full execution PMSY has the potential to generate surplus income for rural households after the investment pay-back period is over through sale of surplus power to the grid. For a 3kw installation, it estimated an income rise of 6.7 per cent of the monthly average rural income, if the household does not use air conditioning units and doesn’t get any free power presently.
"We see a funding opportunity of Rs 25,000 crore, mainly benefiting power finance companies. Among losers, expect distribution utilities to see a hit of Rs 8,700 crore in revenue, as 4 per cent of their sales are projected to transition to solar rooftop due to the installation of 10GW capacity," Elara said.
Elara said its top picks to benefit from PMSY are Tata Power (accumulate, target price Rs 288), REC (Buy, price target Rs 582), IREDA (Not Rated), PFC (Buy, stock price target Rs 326), KEI Industries (Accumulate, share price target Rs 2,700). Besides, it sees Havells India (Accumulate, target price Rs 1,480) and APL Apollo (Accumulate, price target Rs 1,679) as key beneficiary of the scheme.
Elara noted that he government’s existing rooftop solar scheme was lacklustre. The National Portal for Rooftop Solar was launched by Prime Minister Narendra Modi on 30 July 2022. The portal made it easier for residential consumers to apply for and install rooftop solar systems. "But till date, only 56,733 have benefited from the scheme, with total capacity added at 269.2MW and total subsidy of Rs 318 crore. A total of 66 DISCOMS have been onboarded to the scheme. The scheme, has not seen much progress till date," it noted.
Shares of REC are up 12 per cent in the last five days. Tata Power shares are up 4 per cent in the five-day period while IREDA has surged 39 per cent during the same period. PFC has gained 9 per cent, KEI Industries 2 per cent. Havells India shares are down 9 per cent while APL Apollo stocks are down 1 per cent.
Elara anticipated 10GW of solar rooftop installation opportunity to emerge from the recent government announcement. It sees companies such as Tata Power, Sterling Wilson (Not Rated), Adani Enterprises, Borosil Renewables (Not Rated) benefitting from the scheme.
"We estimate PMSY to generate of 30,000 tonnes demand for structural steel pipes. The size of the structural steel pipe industry is estimated at 7.6mn tonnes. Assuming that PMSY is executed over three years, 10,000 tonnes of incremental demand may be added each year," it said.
Among its coverage, Elara sees APL Apollo with market share of 55 per cent in the domestic market beneficiaries. Within Not Rated plays, it felt Surya Roshni (SYR IN), Hi-Tech Pipes, JTL Industries and Hariom Pipe Industries could be key beneficiaries.
In the capital goods sector, it sees key beneficiaries as Sungrow, SMA, SolarEdge, Refusol, Goodwe and Toshiba within inverter plays, Polycab, Havells India and Nordic within DC cables, switches etc, Genus Power, HPL Electric, ITI within Solar Generation meters and Rittal, Havells, Polycab and RR Kabel within AC power distribution boards and AC cables.
"For PV module structure, Tata Power, Sterling & Wilson, and Gensol Engineering may be the key beneficiaries. PV module structure forms Rs 3,650 crore or 7.3 per cent of the overall cost. Other works comprise concrete, screw/fasteners, conduit pipes, accessories, earthing, electrical works, forming Rs 10,000 crore or 20 per cent of the overall cost," it said.
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