Morgan Stanley, in its recent report, has adopted a positive outlook on India’s power utilities sector, driven by the capital expenditure cycle of the power companies amid supply constraints in FY25. The report forecasts stronger earnings for private independent power producers (IPPs) compared to regulated utilities.
“Corporates have raised their capex outlook for the next 3-5 years. This in turn has led to 9% and 12% higher consensus estimates for FY25 and FY26, with utilities stocks up 15-40% (outperforming Sensex by 20%) in the past six months,” Morgan Stanley stated. “In our base case, we expect the gross block for regulated utilities to grow at a high single-digit CAGR, while IPPs grow around 20% in the next three years.”
India’s power demand remains resilient at over 7.5% in FY25 so far. This demand surge has led to higher plant load factors (PLFs) for coal-based power plants, increased merchant volumes on exchanges, and stronger-than-expected profit growth for IPPs.
It also said that the measures by the government to improve supplies by allowing imported coal to be a pass through, buying gas-based generation in crunch periods, improving domestic coal logistics, as well as better plant maintenance scheduling has helped meeting the rise in demand.
“We think momentum on RE auctions, thermal coal & transmission awards is set to accelerate in the coming months; we believe battery energy storage systems (BESS) and pumped storage projects (PSP) will be complementary to conventional power, as India, with the 3rd largest power market globally, will need to tap into all sources of generation & storage.”
From: financialexpress
Financial News
