Power shares electrified by heat wave

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Power sector is in tussle. Discoms have dues for power generation companies and it was reported in March that Power sector companies have dues of more than Rs 20,000 crore to coal companies. Power index has gained as there are expectations of high power demand amid summers. 

ICRA reported that for FY24 power demand will grow by 5% and El Nino can support the power demand. Besides this, there are stock-specific reasons for the rise in power shares but they can be broadly classified as growth in business be it through addition in order books or capacity additions or moving towards renewable energy. 

Tata Power

Tata Power is in the news because it has turned ex-dividend and as the board announced Rs 2 per share dividend. Let’s look at its fundamentals.

Andand Rathi reported that across distribution sales were higher and addition is being done in the renewables portfolio. From long-term point of view shift towards renewable energy while Geojit BNP Paribas added that the company is making strategic investments with EV charging points and across divisions they have backlogs. At the same time, coal prices have cooled. 

Suzlon Energy

The company shares are zooming on capacity additions. The company has announced installations of 20GW of wind energy. In 17 countries 12,647 turbines were installed. Besides this company has an order book of 1,542 MW. Management reported that it will focus on quality orders to get better margins while also focusing on execution as order books in themselves won’t give you revenue until they are executed. It is also reported that the company has reduced its debt levels and due to all that it has touched 52 week high.  

Torrent Power

It has signed MOU with the Maharashtra government for pumped storage hydro projects. It has got 3 projects with an aggregate capacity of 5,700 MW. It would have an investment of Rs 27,000 crore. In light of this, it has gone up more than 28% in last 3 days. 

So for power stocks there is overall positivity in the sector and there is also stock-specific news. This led to a huge rise in their price levels. However, it needs to be seen whether all the fundamental growth is factored in or some steam is still left.