Suzlon Energy, BHEL, Tata Power, NTPC, Inox Wind: Stock price targets & more

The Modi government is steadfastly focusing on achieving 500GW by 2030 target and has been trying to resolve grid and PPA-related challenges, said JM Financial in its latest note on utilities and power equipment sector. The domestic brokerage retained its 'Buy' rating on stocks such as Suzlon Energy Ltd, Tata Power Company Ltd, BHEL, Inox Wind and SJVN among others, saying the government has in the past few weeks taken steps to address two of the three key challenges, except for land.  

The availability of land is a state subject that remains a concern, particularly in Karnataka, JM Financial said. 

"As the contribution from RE is growing in some countries, policy makers are trying to bring it at par with conventional power in terms of pricing and market design. As the share of RE in supply mix in India increases, we expect domestic policies to be influenced by global experiences in the next 3-4 years," the brokerage said.

The renewables sector has so far grown unhindered with continually evolving governance
structure and frequent changes in regulations. As the sector is gaining in size, JM Financial sees the governments across countries attempting to bring discipline among players and proactively working to address the ensuing challenges of grid disturbances. 

"While policy makers remain ambitious in their targets and continue to facilitate execution, there is an emerging feeling among them that subsidy-driven incentives need to be restricted (particularly in China) and promotion of renewables needs to be controlled (in Europe) as the sector struggles with negative prices. Regulatory actions by China and Germany suggest likely developments that, we believe, will be seen in India as well," the brokerage said.

It said the availability of land, grid connectivity and signing of PPA remain most potent challenges in achieving the target of 500GW by 2030, adding that the Modi government has, in the last few weeks, taken numerous initiatives to address two of them except land, which may accelerate the RE capacity addition.

CERC has recently proposed restricted injection rights to developers based on the type of generation. Solar generators will have the right to inject power during solar hours, while non-solar generators (wind, hybrid, energy storage), will have their injection rights during non-solar hours. 

"This is likely to enhance the integration of RE and release sizeable connectivity for wind power projects from existing solar projects. Additionally, the initiative brings time-bound commitment for commissioning of the projects with an objective to control ‘accumulation’ of connectivity by developers without projects’ delivery commitments," JM Financial said.

In view of the recent fiasco -- cancellation of LOA placed on JSW Energy by SECI, and problem of unsigned PPAs, the Ministry of Power has amended TBCB guidelines mandating signing of PPA and PSA within 30 days from issuance of LOA, which can be extended up to 12 months with cancellation thereafter. Currently, more than 40GW of RE projects are waiting for signing of PPAs, JM Financial said.

JM Financial suggested targets of Rs 358 for BHEL, Rs 210 for CESC Rs 80 for Suzlon Energy, Rs 262 for ACME and Rs 351 for Power Grid. It suggested targets of Rs 212 for Inox Wind, Rs 456 for Tata Power, Rs 100 for NHPC, Rs 659 for JSW Energy, Rs 1,593 for Torrent Power and Rs 359 for NTPC. 

"We have a HOLD on Coal India (TP: Rs 362) and SELL on SJVN (TP: Rs 67)," the brokerage said.