Suzlon Energy, Inox Wind, Tata Power, BHEL, IEX, SJVN, Power Grid, NTPC: Share price targets

JM Financial in a fresh note on utilities noted that a total of 46GW of renewable energy (RE) projects are currently awaiting the signing of power purchase agreements (PPAs), stemming from a disproportionate surge in bids driven by the government’s mandate to invite bids for 50GW of RE capacity annually during FY24–28. 

The evolving demand from discoms - shifting from vanila solar and wind projects up to 2019, to firm and dispatchable renewable energy (FDRE) and round-the-clock (RTC) in 2022, and now to solar combined with battery energy storage systems (BESS) - has contributed to the complexity, it said. 

For now, the domestic brokerage retained 'Buy' rating on Suzlon Energy and Inox Wind, expecting up to 42 per cent potential upsides. Among power sector companies, JM Financial has 'Buy' recommendation on Tata Power Company Ltd, JSW Energy, NHPC, CESC, Power Grid and BHEL. The domestic brokerage retained 'Hold' on Coal India, Torrent Power, ACME Solar and IEX. SJVN is a sell call, JM Financial said.  

To be sure, a total RE capacity of 84GW was under construction till June. This included 54GW of solar, 17GW of wind and 13GW hybrid capacity. Given the large pipeline of RE capacity additions, discoms seemed not in a hurry to sign PPAs for more capacities, JM said. 

Growth in solar PV generation capacity in RE-rich states, coupled with subdued demand, has led to excess supply. 

"A large pipeline of RE projects is under construction, reducing the enthusiasm among discoms to sign PPAs for new projects. While bidding for RE projects has slowed in recent months, excluding storage projects, we expect a pickup in PPA signings for older projects following new localisation mandates, which are likely to increase tariffs. Nonetheless, a revival in power demand remains the critical starting point," JM said.

For now, Inox Wind's target stands at Rs 216, hinting at 42 per cent upside. Suzlon Energy's target has been set at Rs 81, suggesting 24 per cent upside. CESC and ACME Solar targets suggest over 20 per cent upside each. 

Target price for Tata Power at Rs 436 suggests 13 per cent potential upside. BHEL's target of Rs 281 suggests 13 per cent potential upside.