Suzlon, Tata Power, Premier, JSW Energy, NTPC Green: Fresh targets & risks for these utility stocks

Ambit said Section 63 could again become important in India’s thermal power tendering cycle, with the framework now less risky for developers than in the past. According to Ambit, SHAKTI-linked coal at CIL-notified prices and the DBFOO model have reduced fuel-price risk, while new tenders with capacity charges of about Rs 3.5-4/kWh can potentially support 20 per cent equity internal rate of return.

Ambit said this could be significant for Indian utilities stocks, especially Adani Power. Of the roughly 50GW pipeline yet to be tendered, about 21-22GW is in states that have historically been more Section 63-oriented, and Ambit expects around 15GW of tendering this year from Uttar Pradesh, Gujarat, West Bengal and Uttarakhand.

Section 63 was at the centre of the previous thermal cycle, with projects accounting for about 56.5GW, or nearly 60 per cent of overall thermal tendering in FY07-11. Ambit noted that many of these projects later came under stress as a combination of power surplus and coal-block deallocation hurt viability. Tendering then slowed materially in FY12-22, with Section 62 accounting for more than 90% of overall tendering.

Ambit said the upcoming opportunity is supported by Adani Power’s execution capabilities and secured BTG equipment. It also mapped state-level trends, saying Andhra Pradesh, Assam, Gujarat, Haryana, Maharashtra and Madhya Pradesh have been more Section 63-leaning, while Bihar and West Bengal have recently moved towards that model.

Ambit flagged storage and battery energy storage systems as the key risk. It said falling sodium-ion battery prices could trigger wider adoption, weaken demand for LFP and push both price curves lower. If non-solar peak demand rises 6 per cent annually to 340GW by FY32, thermal additions reach 47GW and BESS capacity exceeds 47GW/188GWh by FY32, Ambit said India could face thermal oversupply.

Tata Power | Buy | Target Price: Rs 420 Risks: Higher coal prices; any other investment opportunities.

NTPC | Buy | Target Price: Rs 420 Risks: Lower industry demand growth; moderation in BESS prices; delays in the commissioning of NTPC projects

Torrent Power | Sell | Target Price: Rs 1,270 Risks: If LNG gas prices fall, there could be upside to gas earnings; multiple new DISCOM opportunities

Power Grid | Sell | Target Price: Rs 280  Risks: More than Rs 2 lakh crore capitalisation over the next 5 years; more discipline in TBCB bids

Suzlon Energy Ltd | Buy | Target Price: Rs 59 Risks: Implementation of DSM regulations could impact project for wind IPPs;  continued slowdown in power demand could mean lower wind capacity additions.

NTPC Green Energy | Sell | Target Price: Rs 85 Risks: Returns improve in RE as supply/demand keeps getting tighter; lower interest rates; new project tariffs would reflect lower debt costs

JSW Energy | Sell | Target Price: Rs 525 Risks: Less than or equal to 5 per cent demand growth; higher curtailments; higher interest rates

Premier Energies Ltd | Sell | Target Price: Rs 970 Risks: lower-than-or-equal-to 5 per cent power demand growth, faster-than-expected ramp-up of new cell lines by peers

Emmvee Photovoltaic Powe | Sell | Target Price: Rs 380 Risks: Lower-than-expected EBITDA margin due to heightened competition; newer cell lines coming in 18-24 months; low power demand growth implying lower requirement for solar modules

Saatvik Green Energy: | Sell | Target Price: Rs 380 Risks: Lower-than-expected EBITDA margins due to heightened competition and newer cell lines coming in 18-24 months; low power demand growth implying lower requirement for solar modules.