NTPC, SJVN share price rally as Goldman Sachs initiates coverage
NTPC share price gained over 5%, while SJVN shares rallied more than 9% on Wednesday after Goldman Sachs initiated coverage on the stocks with Buy ratings.
Goldman Sachs is of the view that India’s power sector is undergoing a generational shift. It believes that in India’s move to shift towards clean energy, the transition led business model upgrades and rising peak deficits will drive re-rating in power stocks.
The global brokerage sees two key themes playing out in India’s power sector. Firstly, economics-led Renewable (RE) transition being driven by the viability of Round-the-clock Renewables (RTC RE), which has the potential to unlock a superior business model for traditional utilities, offering higher returns and access to a better customer base.
Simultaneously, the onset of a peak power deficit cycle caused by a secular rise in peak demand being met by inadequate ‘firm’ capacity addition.
Goldman Sachs has initiated coverage on NTPC with a Buy call and 12-month target price of ₹265 per share, implying an upside of 34% from Wednesday’s high price. NTPC is also the brokerage’s top pick in the sector, given its exposure to both themes.
“In our view, NTPC will emerge as a winner in this transition, as its ‘structural advantage’ of low cost debt will provide a strong moat. At the same time, rising peak shortages will re-rate its legacy thermal business, like in the previous cycle,” Goldman Sachs said in a report.
It has also initiated coverage on SJVN with a ‘Buy’ rating and 12-month target price of ₹55 per share, which is 9% upside from today’s high price, for its exponential RE growth targets backed by low cost of debt, medium term earnings boost from commissioning of 2 large plants and material growth optionality from hydro and pumped hydro projects.
Goldman Sachs initiated coverage on Tata Power Company with a ‘Sell’ rating and 12-month target of ₹190 per share, implying a downside of 14%, given the medium term earnings headwind from global coal cost decline and limited growth catalysts in the renewables business since its partial monetisation in FY23.
Meanwhile, in its attempt towards a greener future, India at the Paris Accord committed to increase its non-fossil fuel energy capacity to 500 gigawatt (GW) by 2030 and 50% of its energy requirements from renewable sources by 2030.
India has also committed to achieve its target of net zero emissions by 2070
India has set a target to reduce total projected carbon emissions by 1 billion tonnes through 2030 and to bring down the carbon intensity of the economy to less than 45%.
At 2:25 pm, the shares of NTPC were trading 3.04% higher at ₹192.90 apiece, SJVN was trading 6.55% higher at ₹48.80, and Tata Power Company was trading 1.04% lower at ₹219.20 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 19 Jul 2023, 02:28 PM IST
