Tata Power, Suzlon Energy, NTPC, NHPC, BHEL, JSW Energy: Power demand weak in Q3; what's ahead?

JM Financial in its fresh note on utilities said energy and peak power demand during October 1 and November 27 moderated to 2.2 per cent and 1.1 per cent YoY, respectively, deviating from the recent trend. Given the subdued demand and sufficient supply (generation up 6 per cent YoY), merchant power rates have moderated, it noted. 

"We believe the current slowdown in power demand, which will impact utilities performance in Q3FY25, is driven by increasing weather unpredictability rather than signalling a ‘new normal’. With the revival in capital expenditure across the entire power value chain after a decade, we maintain buy rating on Tata Power, Torrent Power, Suzlon Energy, Power Grid, NTPC, NHPC, JSW Energy, Coal India, CESC and BHEL and sell rating on SJVN," it said.

JM Financial said generation at various utilities during October and November, as per CEA, declined YoY for gas-fired and merchant power capacities and improved for hydropower :  NTPC (up 1.2 per cent), NHPC (down 1 per cent), SJVN (up 23 per cent), JSW Energy (up 9 per cent, addition of capacity), Tata Power Mundra (up 9 per cent), Torrent Power (down 35 per cent).

It noted that extended and excess monsoon led to reduce demand from agriculture. Normally, demand regains growth momentum from November, which is not seen so far in FY25. 

"During 50 per cent of the days in November, peak power demand during solar hours is more than non-solar hours, not seen in recent times. Normally, demand regains growth momentum from November, which is not seen so far in FY25," JM said.

Hydropower generation with 7 per cent YoY growth continues to see traction, it said. The PLF of coal-fired and gas-fired plants have moderated to 69 per cent and 13 per cent in October against 72 per cent and 17 per cent YoY. 

In a note earlier this week. JM Financial said while the execution poses certain challenges, they are not significant enough to disrupt the overall growth cycle. 

At present, NHPC and SJVN are positioned favorably, experiencing a surge in capacity additions after a long haul, it said while adding that CESC and Tata Power are focusing on renewable energy (RE) capacity expansions as a key driver for their growth. 

"JSW Energy continues to identify opportunities in distressed assets across both thermal and RE, in addition to engaging in merchant trading. Suzlon Energy remains optimistic about the ongoing momentum in capacity additions and is actively exploring diversification opportunities, both in terms of business and geographic expansion," it said.

JM Financial has a 'Buy' rating on Tata Power with a target price of Rs 501. It values JSW Energy at Rs 791. JM Financial has a 'Buy' rating on Suzlon Energy with a target price of Rs 81. JM Financial has a 'Buy' rating on NHPC with a target price of Rs 108. It suggested a 'Sell' rating on SJVN with a target price of Rs 71. JM Financial has a 'Buy' rating on CESC with a target price of Rs 206.