Utilities: Stable earnings with pockets of strong growth: Quarterly Preview

MOFSL expects 22% YoY earnings growth for its universe and 27% growth for the Nifty-50 in 2QFY27, even as global uncertainty, FII outflows and elevated energy prices weigh on sentiment.

MUMBAI, 8 OCTOBER: Power generation grew 11.2% YoY to 536BU in Q2FY27, driven by strong coal-based generation, while peak demand remains elevated at 269GW. IEX traded volume increased 12.7% YoY to 39,685MU, with Day Ahead Market (DAM) and Real-Time Market (RTM) prices rising 46% YoY and 49% YoY, respectively. We expect mixed earnings across our coverage universe, with regulated utilities likely to remain stable. Renewable generators may see weaker utilization in Q2FY27, although ACME Solar should benefit from BESS and merchant operations. Renewable equipment manufacturers are likely to face margin pressure from higher commodity cost. Our preferred top picks are NTPC, NLC India, CESC.

Generation increases 11.2% YoY in Q2FY27: Power generation sustains strong growth momentum in Q2FY27, supported by higher temperatures, a muted Monsoon, and robust industrial demand. Generation rose 10.58% YoY to 181BU in July, 11.8% YoY to 180BU in August, and 11.2% YoY to 173BU in September. Overall, power generation grew 11.2% YoY to 536BU in Q2FY27. Coal-based generation rose 13% YoY to 343BU while hydro generation declined 20% YoY to 59.7BU, due to weaker Monsoon. Renewable energy generation remains strong, up 33% YoY to 101BU.

Peak demand remains at elevated levels: After reaching a record high of 270GW in Q1FY27, peak power demand remains elevated in Q2FY27, reaching 269GW in September, up 17% YoY. Peak demand stood at 270GW in July, up 23% YoY, and 258GW in August, up 13% YoY. IEX, in Q2FY27, achieved electricity traded volume of 39,685MU, marking a 12.7% YoY increase. The average market clearing price in DAM at INR 5.7/unit in Q2FY27 increased 46% compared to Q2FY26. Similarly, the average market clearing price in the RTM at INR 5.2/unit during Q2 FY27 surged 49% compared to Q2FY26.

Mixed earnings expected for companies in our universe: We expect mixed earnings performance across our coverage universe. Regulated utilities, including NTPC, NLC India, Power Grid Corporation of India, SJVN, and NHPC are likely to report stable earnings, supported by assured returns on their regulated equity base. IEX is set to deliver healthy earnings, led by continued volume momentum, while Adani Energy should report strong growth, led by incremental revenue contribution from its energy solutions business. Q2 is seasonally weaker for renewable generators, with Monsoon-related factors usually weighing on capacity addition and utilization. Renewable firms, such as JSW Energy & Adani Green, could see some impact from lower utilization in Q2FY27. ACME Solar, however, is likely to report strong earnings, led by incremental revenue from its battery energy storage business and merchant operations. In the renewables equipment space, manufacturers, Waaree Energies, Vikram Solar, Emmvee Photovoltaic, & Premier Energies, are likely to face margin pressure amid higher commodity cost. Competition.

Report by: Rupesh Sankhe, ELARA CAPITAL

(Disclaimer: The information provided here is investment advice only. Investing in the markets is subject to risks and please consult your advisor before investing)

(સ્પષ્ટતા: અત્રેથી આપવામાં આવતી તમામ પ્રકારની માહિતી કોઇપણ પ્રકારે રોકાણ/ ટ્રેડીંગ માટેની સલાહ નથી. બજારોમાં રોકાણ જોખમોને આધીન છે અને રોકાણ કરતા પહેલા કૃપા કરીને તમારા સલાહકારની સલાહ લો. વધુમાં અત્રે પ્રગટ થયેલા કોઇપણ સમાચાર કે વિગતો સાથે businessgujarat.in અંશતઃ કે સંપુર્સણપણે સહમત નથી.)