Capital markets and investment group CLSA in its latest report said that it expects an overall turnaround in the power sector in Q1FY20 with an increase of 46 percent in profit after tax (PAT).

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“The key to watch in Q1FY20 will be the impact of regulation FY19-24 and consolidated financials. We expect an overall turnaround in the power sector with PAT +46 percent YoY. Growth at regulated utilities should improve the under-recoveries of RoE given better operations. Regulated equity growth may be muted on change in debt/equity mix under regulation FY19-24," it said in its report.

The brokerage raised the target price for NTPC to Rs 170 and Power Grid to Rs 230. It maintained a 'buy' rating on CESC and Tata Power but gave 'sell' recommendations to Adani Power and JSW Energy.

“IPP debtors rose 28 percent YoY to May 2019. Regulatory asset or receivables from consumers allowed by regulators but not immediately built into tariffs is estimated at Rs 769 billion. While overdue debtors for IPPs have declined, the same for others have risen," the report said.

“NTPC shall report PAT +17 percent – above its regular equity growth on lower under-recoveries. Power Grid again missed commercialisation of key HVDC line; hence, we expect momentum on capitalisation to slow, risking its trend of being higher than capex. At CESC, we look at lower losses at its Dhariwal and Rajasthan DISCOMs," the brokerage added.

It also said that India’s power generation growth of 8.5 percent YoY in June should surprise markets swamped with gloomy economic data. Adani Power was the star IPP with 108 percent growth in Q1 generation on higher tariffs led by Gujarat government order led positive CERC judgement.

First Published:Jul 17, 2019 9:14 AM IST