Multinational brokerage firm UBS has upgraded the rating and share price targets of Power Grid Corp., NTPC Ltd. and NHPC Ltd. on higher expected summer power demand besides calling them a defensive play in the current market setup.
Analysts attributed their bullish call to improving visibility on long-term power demand driven by increasing data center capacity, consumer durables, EV penetration and likely government policy push towards energy security post the ongoing Iran conflict. These stocks have corrected 14-18% since their peak in September 2024 and the risk-reward now seems favorable, they said in a note.
With the Nifty down 9% year-to-date and earnings visibility across cyclical sectors getting clouded by global macro headwinds, power utilities offer a rare mix of earnings predictability and reasonable valuations, UBS said.
"Regulated power utilities in our coverage offer with 8-9% earnings growth over FY27-28 driven largely by planned capacity additions... Power utilities hence present a compelling risk-reward for investors looking for a defensive play with growth visibility," the note said.
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Target Price Change
- Power Grid: Upgrade to 'Buy' from 'Neutral'; Hike target price to Rs 340 from Rs 301
- NTPC: Upgrade to 'Buy' from 'Neutral'; Hike target price to Rs 432 from Rs 352
- NHPC: Upgrade to 'Buy' from 'Underperform'; Hike target price to Rs 88 from Rs 70
Power Grid
According to UBS, the recent upward revision to commissioning guidance for FY26-27 by Rs 13,000 crore provides increased execution visibility coupled with continued upside surprise in capex guidance on cost escalations. Steady project awarding momentum could also support the stock.
NTPC
The brokerage said delays in thermal execution could reduce due to execution of spilled over capacity additions over the last three years. Upward revisions in thermal capacity requirements could also improve long term visibility on thermal capex which could be positive for the stock.
NHPC
The commissioning of the Parbati-Il project in Himachal Pradesh and partial start of Subansiri Lower in Arunachal will improve visibility on regulated equity and earnings growth. Further, increasing storage requirement for renewables supports pumped storage demand in the medium to long term, UBS said.
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