Powerful Q4 performance anticipated for power sector amid rising demand

The power sector is in focus given the advent of seasonal demand and hopes of higher economic activity. Market consensus is that the January-March quarter (Q4) of 2024-25 (FY25) will see good returns for the sector. 

 

Peak demand was up 14 gigawatt (Gw) year-on-year (Y-o-Y) in Q4FY25 but merchant prices did not rise much due to 4.1 Gw thermal capacity additions in FY25. In the nine months ended December 2024, total wind power addition was 2.3 Gw, and 15.5 Gw of wind-related capacity was awarded.

 

Coal-based generation increased 2 per cent Y-o-Y to 341 billion units (BU) in Q4FY25. Hydro generation increased 23 per cent Y-o-Y to 25BU. Gas-based generation declined 30 per cent Y-o-Y to 5BU. 

 

Renewable generation increased 25 per cent Y-o-Y to 60BU. For Q4FY25, IEX achieved the highest-ever quarterly electricity volume of 31,747 million units (MU), an 18 per cent Y-o-Y increase.

 

Cumulative all-India electricity demand over January-March was about 416BU compared to 400BU for January-March 2024.

 

Merchant prices did improve somewhat quarter-on-quarter (Q-o-Q) but may be flat Y-o-Y. Coal production and prices were soft.

 

Capacity additions for NTPC, and a ramp-up of solar cell-module manufacturing for Tata Power are newsworthy events apart from initial public offerings (IPOs) by NTPC Green and Acme.

 

Equipment players like Bharat Heavy Electricals Limited (BHEL), Suzlon and INOX Wind may also report good results, given good order books and acceptable execution. 

 

Power Grid Corporation may see flat performance in Q4FY25 but could be braced for a strong profit rebound from Q1 of FY26.

 

NTPC is likely to see double-digit Y-o-Y adjusted profit after tax (PAT) growth in Q4FY25, due to ₹1,600 crore increase in its regulated equity from the 660 megawatt (Mw) Khurja thermal plant, and a favourable outcome of ₹270 crore in fixed cost recovery (around ₹230 crore of under-recovery was reversed in Q4FY25). 

 

Revenue may grow by 5-6 per cent Q-o-Q due to higher seasonal demand (almost flat Y-o-Y).

 

NLC India’s revenue and earnings before interest, tax, depreciation, and amortisation (Ebitda) are expected to grow strongly both Y-o-Y and Q-o-Q. 

 

Revenue may grow 25-30 per cent Y-o-Y while Ebitda could more than double Y-o-Y led by improved thermal generation (6,783 MU in Q4FY25). 

 

NLC commissioned 660 Mw Unit 1 of the Ghatampur power plant (which will be 3 units of 660 Mw) in December 2024. Units 2 and 3 are to be commissioned in May 2025 and October 2025, respectively. Tax differences may lead to lower unadjusted PAT.

 

Tata Power may see significant rise in PAT in Q4FY25 in the 35-40 per cent range over the year-ago quarter, due to scaling up of solar cell-module volumes and 450 Mw of renewables capacity addition. The Odisha distribution profitability is also expected to improve.

 

JSW Energy may also see double-digit revenue growth and nearly 25 per cent PAT increase on the consolidation of Mahanadi acquisition, 350 Mw commissioning in Odisha and potentially up to 500 Mw of wind project commissioning. 

 

But somewhat flat merchant prices and higher financing costs as well as depreciation and amortisation may hold down PAT.

 

NTPC Green has added 400 Mw of capacity in Q4FY25, taking the total FY25 capacity addition to 1 Gw (versus the earlier target of 3 Gw). 

 

PAT is expected to jump off a low base to around ₹140 crore for Q4FY25 versus ₹80 crore Y-o-Y. The company may also benefit from high other income generated by the higher cash balances post IPO.

 

Acme Solar may see a turnaround with a substantial profit in Q4FY25 versus a loss of ₹9 crore in Q4FY24, driven by 1.35 Gw capacity addition in FY25 and high other income post-IPO. It has a big order book.

 

BHEL’s net revenue could increase by 25-30 per cent Y-o-Y driven by a strong order book and better execution. Suzlon’s PAT may increase on account of higher dispatches. Inox Wind’s revenue is expected to more than double due to robust execution.