Tata Power, Adani Green, NTPC, JSW Energy shares: Bernstein targets, what investors should chase

Foreign brokerage Bernstein in its fresh note suggested an 'Outperform' rating on Tata Power Company Ltd, JSW Energy Ltd and NTPC Ltd while recommending an 'Underperform' on Adani Green Energy, with its target prices suggesting 23-34 per cent upside for the first three and a 22 per cent potential downside for the Adani stock. 

Bernstein said the crowd is chasing Solar+BESS, a battery energy storage system, but it believes one should chase private thermal and pumped storage. 

This, it said, is clearly visible in competitive intensity in bids, noting  that pumped storage and thermal power tenders see 3-5 bidders, as against 20-plus companies bidding for Solar+BESS projects.

Thermal is limited by equipment and plant size, pumped storage by access to strategic sites, it said adding that there is no barrier to entry in the case Solar+BESS.

"A big issue with renewable tenders have been that while the tariff looks good, it is not converting to a firm off-take agreement. In this case if we compare the cost of different options to store power, and considering this tender does not have any solar attached to it, we see good chances of this contract converting to a firm PPA (some haircut DISCOMs might need)," Bernstein said.

On top of it, Bernstein said, there is a waiver on transmission charges on Pumped Storage Projects (PSP) projects for a period of 25 years from the Commercial Operation Date (COD), in respect of projects for which the construction work is awarded on or before 30th June 2028.

"Latest SECI tender result had a condition for the plant to get commissioned in 3 years from PPA date, this also helped reduce competition further. As per our estimates, the bid could result in 20%+ equity IRR for Tata Power," Bernstein said.

Bernstein said JSW Energy is an early mover. Tata Power while lower in scale benefits from an existing reservoir at its sites, it said. 

Bernstein has a target of Rs 430 on Tata Power, hinting at 34 per cent potential upside. Its target of JSW Energy at Rs 623 implies 23.4 per cent potential upside over Tuesday's closing price. NTPC with a prie target of Rs 450 offers 27.7 per cent downside. Adani Green, meanwhile, received a target of Rs 1,000, hinting at 22 per cent potential fall.

"The government intent on PSP is very clear in their plan. In fact even China which makes 80-90 per cent of global batteries is tripling PSP capacity," the foreign brokerage said.