4 Power Stocks To Buy For Value Long-term Investors As Fundamentals Remain Robust

The power sector has a very good earnings performance in Q4, according to Sharekhan. Here are 4 power stocks that the firm believes can generate good returns for shareholders.

Strong earnings

According to Sharekhan, the power sector reported strong performance with Tata Power/ NTPC being the best performer with 66%/19% y-o-y PAT growth while Power Grid reported decent earnings growth of 6.1% y-o-y in Q4FY22.

"However, CESC's performance was muted with 4% y-o-y decline in PAT. Tata Power's earnings growth was supported by higher dividend income, tax benefit from CGPL merger in standalone business and good performance from RE generation business partially offset lower profits from coal business. The strong earnings growth for NTPC was led by fixed cost over-recovery of Rs238 crore, RoE contribution from commercialization of projects and lower tax rate. Power Grid's earnings growth was decent but missed consensus estimate due to lower-than-expected asset capitalisation and lower incentive income," the firm has said.

Stocks to buy from the power sector space

Sharekhan has recommended 4 stocks to buy from the power space, namely: Tata Power, NTPC, Power Grid and CESC. The firm has set a price tatget of Rs 170 on the stock of NTPC, while for Power Grid, the firm has set a price target of Rs 265 on the stock. It also sees CESC, another power player reaching a target price of Rs 95 and has recommended to buy the stock of the company. The last share from the power space, where Sharekhan has a buy call is Tata Power, where it has set a price target of Rs 265 on the stock.
"Management guidance was strong for NTPC with commercialisation target of 5GW/6GW of capacities in FY3E/FY24E but Power Grid guided for muted asset capitalisation guidance of Rs. 10,000 crore/Rs. 10,000 crore for FY2023E/FY2024E versus Rs. 20,695 crore in FY2022. Tata Power's management indicated that it is in advanced discussions with Gujarat government and is in talks with other states for supplementary PPAs for fuel coal cost pass through for Mundra UMPP, which would reduce fuel under-recoveries," the firm has said.

Disclaimer

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