Gains for power stocks hinge on project execution, valuations and demand

Utilities are expanding renewable, hydro and storage capacity as power demand rises, but project execution, regulatory uncertainty and valuations remain key

Power utilities reported 12 per cent earnings per share (EPS) growth during Q1FY27 with high demand off a lower base in Q1FY26.

 

Capacity continues to see a planned structural shift from thermal to renewable energy (RE), hydroelectric, pumped storage plant (PSP), battery energy storage systems (BESS) and nuclear. Nuclear and coal gasification are at an early stage.

 

The Central Electricity Authority (CEA) forecasts peak demand requirement of 366 gigawatts (Gw) by FY32, necessitating capacity enhancements.

 

India aims to increase its installed capacity to 610 Gw by FY27 and 900 Gw by FY32. The installed capacity was 554 Gw as of June 2026.

 

Power majors NTPC, JSW Energy, Adani & Tata Power are all prioritising predictable returns over merchant power. Adani Power is the strongest thermal earnings-growth story, while Adani Green is scaling up in RE and BESS.

 

Hydroelectric players, NHPC and SJVN face near-term generation constraints, while Power Grid Corporation lags in execution.

 

Adani Energy, Torrent, CESC, and Tata Power are expanding their clean-energy portfolios, building large RE & PSP capacities. The current BESS arbitrage is ₹7-9/unit versus a historical average of ₹4-5/unit.

 

Among equipment manufacturers, Bhel is seeing an execution pick up. In RE, solar players with in-house cell capacity like Emmvee and Premier have an edge. Emmvee could see a rerating since it has a relatively low valuation.

 

Wind ordering is improving, but Chinese competition is a concern. Coal India has margin and production pressures. IEX has regulatory uncertainty.

 

NTPC is diversifying the generation mix from thermal to RE and hydro with a focus on power purchase agreement (PPA) over merchant. JSW Energy is focussed on PSP, RE and building capacities in wind blade and BESS. Adani Power raised its capacity target from 42 Gw to 45 Gw.

 

Renewable capacity additions are robust at Adani Green with a BESS focus. Targets are ambitious at 50 Gw RE and 50 GWh BESS. At hydropower generator NHPC, incremental generation from 1,000 Mw Subansiri and 800 Mw Parbati-II led to better performance, though hydel generation is likely to remain low due to weak rainfall.

 

Regulated equity means the commissioning of new projects and is a key monitorable. For SJVN, which is also mainly hydro in profile, thermal generation from the newly commissioned 1,320 Mw plant at Buxar helped offset a slowdown in hydel generation. 

 

Analysts say Adani Power is expensive in terms of valuations but has strong earnings growth. Bhel has seen a jump in earnings and a huge order book of ₹2.6 trillion (up ₹60,000 crore year-on-year or Y-o-Y) with multi-year revenue visibility.

 

NTPC has fair valuations. Adani Energy looks expensive and it has launched a new platform for energy trading.

 

In transmission, Power Grid maintains its FY27 capex and capitalisation guidance of ₹37,000 crore, and ₹30,000 crore, respectively, and it has a strong bidding pipeline.

 

For Torrent Power, the distribution business continues to offset thermal losses, but the gas plant load factor (PLF) is poor. Benefits from the Nabha acquisition are expected to be realised from the next quarter (current quarter contribution was 6 days).

 

CESC is focussing on building RE capacities. It has acquired RE assets from ReNew (transaction to close in October 2026), while generation and distribution businesses are steady.

 

Tata Power maintains targets for RE and PSP with a continued shift from thermal to clean energy.

 

Odisha discoms and cell/module businesses were strong, but near peak performance. Rooftop solar growth continues. Execution of the large capacity under-construction (5.3 Gw RE, 4.5 Gw PSP/hydro) is key.

 

Solar equipment players see in-house cell facilities as a major competitive advantage, while non-domestic content requirement solar panels (nDCR) segment has turned unprofitable.

 

Emmvee and Premier maintain margins due to cell manufacturing facilities. However, Waaree and Vikram saw margin misses due to low integration.

 

In the wind segment, tendering and ordering are picking up. But commissioning lags deliveries in addition to increasing competition from Chinese original equipment manufacturers (OEMs).

 

Order book is expanding for Suzlon and Inox Wind. Suzlon saw margin compression and Inox Wind had misses due to lack of executable orders.

 

Power exchange IEX posted consensus results and saw trading volumes up 16 per cent Y-o-Y.

 

But the Supreme Court has allowed CERC to proceed with framing market coupling regulations, which may have an adverse effect.

 

The Indian Gas Exchange (IGX) has filed a draft red herring prospectus (DRHP) for its proposed IPO. IEX holds 47.3 per cent stake in IGX, and according to Petroleum and Natural Gas Regulatory Board (PNGRB) regulations, it must reduce stake to 25 per cent.