BHEL, Inox Wind, Suzlon Energy shares: What ICICI Securities says on these companies

ICICI Securities in a latest note said the gap between power capacity and peak demand has been widening. Peak shortages stood a 2GW, 9GW and 11GW in the last three years, indicating the severity of the situation. The brokerage said that the new supply has lagged demand in the last few years and FY24 was no exception. The grid is in a fix, it said.

India added net firm capacity of 6.5GW while the incremental peak demand was 18GW. As a result, supply has caught up with demand, ICICI Securities said.

"We estimate that the demand-supply situation has become adverse and is unlikely to improve in the near term given the existing pipeline. As a result, the Indian government has raised the coal-based target to 88GW by FY30. We have a BUY rating on BHEL, as we expect it to benefit from new coal build out," the brokerage said.

The grid also saw infirm capacity addition of 18GW or 30BU, only 25 per cent of incremental demand. ICICI Securities expects new capacity for wind and solar to pick up materially over the next 12–24 months.

"Wind power addition has picked up in FY24 and its share in bids tendered and bid pipeline has also improved significantly. This naturally bodes well for Suzlon Energy Ltd and Inox Wind Ltd. Also, the need to add thermal capacity is now well acknowledged. We expect thermal ordering of 4-5GW per year in coming years and BHEL remains the natural beneficiary," it said.

India has set a target of 30 per cent domestic consumption through RE by end of FY25, which increases progressively to 43 per cent by end of FY30. The net supply was at 13 per cent of overall generation in FY24 and the total capacity at end-FY23 for renewables was 144GW. India produced renewables of 225BU against a target of 488BU.

"The grid needs to add: 1) coal; 2) gas; 3) nuclear; and 4) storages. While battery storages are long-term solutions, in the interim, India needs to add enough coal-based capacity to navigate the transition. We note that the BESS has become cheaper, but it will take some time for it to be the mainstay in grid," ICICI Securities said.