Q2 Earnings Preview: JM Financial's Stock Price Targets for NTPC, Tata Power, Suzlon Energy & More

As the second quarter earnings season unfolds, JM Financial has provided key insights and stock price targets for several leading power companies, including NTPC, Power Grid, Tata Power, JSW Energy, and others. In light of moderate power demand and stable fuel prices, analysts expect many companies to show flat or negative revenue growth for Q2FY25. However, the outlook for capacity additions, coal prices, and power production will be closely monitored.

Stock Price Targets from JM Financial

JM Financial has assigned target prices for several power companies, signaling its expectations for their future performance:

• NTPC: Buy rating with a target price of Rs 451

• Power Grid: Target price of Rs 381

• Tata Power: Target price of Rs 491

• JSW Energy: Target price of Rs 793

• NHPC: Target price of Rs 111

• Suzlon Energy: Target price of Rs 71

• BHEL: Target price of Rs 361

• Torrent Power: Target price of Rs 1,791

• CESC: Target price of Rs 201

• SJVN: Sell recommendation with a target price of Rs 71

The brokerage will review these targets following the Q2 results.

Q2 Earnings Expectations: Mixed Performance Ahead

NTPC

NTPC is expected to report net sales of Rs 44,000 crore for Q2FY25, reflecting a slight 2% year-over-year (YoY) decline due to moderating power demand. Earnings before interest, tax, depreciation, and amortization (Ebitda) are estimated at Rs 12,700 crore, with net profit (PAT) projected to grow by 4% YoY to Rs 4,892 crore, primarily due to stable coal costs.

Power Grid and CESC

Power Grid is expected to have a flat quarter with net sales at Rs 11,200 crore and an Ebitda margin of 87%. The company's profit is forecasted to increase by 2% YoY to Rs 3,864 crore. CESC, however, may face a 2% YoY decline in revenue, mainly due to lower power generation caused by high rainfall. CESC’s profit is also expected to decrease by 2% to Rs 355 crore.

Suzlon Energy

Suzlon Energy’s revenue is projected to grow by at least 18% YoY, driven by higher dispatches. The company’s net profit is forecasted to double to Rs 206 crore from Rs 102.30 crore in the year-ago quarter, aided by the absence of a one-off loss from a subsidiary sale seen last year.

Bharat Heavy Electricals Ltd (BHEL)

BHEL’s sales are expected to increase by 19% YoY, benefiting from a strong order book in the power segment. The company’s net loss is anticipated to narrow to Rs 85 crore from Rs 211.40 crore in the previous quarter and Rs 238.10 crore in the same period last year. The improvement in earnings before interest, taxes, depreciation, and amortization (Ebitda) is likely to be driven by operating leverage and a favorable order mix.

JSW Energy

JSW Energy is forecasted to see a 12% YoY increase in revenue, largely attributed to higher thermal power generation and contributions from its Ind-Barath plant. However, the company’s net profit may fall by 28% YoY to Rs 618 crore due to rising fuel costs returning to normal levels compared to the low base of Q2FY24.

NHPC

NHPC is expected to report Q2 sales of Rs 3,044 crore, a 4% YoY increase, with an Ebitda margin of 60%. However, its profit is forecasted to decline by 32% YoY to Rs 1,044 crore due to the absence of a Rs 500 crore tax credit that benefited the company in the base quarter.

SJVN

SJVN is projected to report a 15% YoY rise in revenue, driven by significantly higher hydroelectric power generation. Despite this, JM Financial has a ‘Sell’ recommendation on the stock with a target price of Rs 71, reflecting concerns over long-term growth prospects.

Tata Power

Tata Power is expected to report flat sales with a projected 8% decline in its Ebitda margin, largely due to lower earnings from its Indonesian coal mines. The company’s net profit is expected to fall by 11% YoY to Rs 905 crore.

Torrent Power

Torrent Power is likely to post a flattish quarter, with revenue expected to decline by 2% YoY to Rs 6,821 crore. This drop is attributed to lower generation from its gas-fired plants. Profit is estimated to decline by 3% YoY to Rs 539 crore.

Key Industry Trends: Capacity Expansion and Demand Outlook

JM Financial highlighted several key factors that will be of interest in the Q2 earnings reports of power companies:

• Power Demand: Demand for electricity is expected to gain momentum during the festive season, with the Central Electricity Regulatory Commission (CERC) forecasting peak power demand of 230 GW in October. Moreover, the Indian Meteorological Department (IMD) has projected a potentially harsh winter due to La Niña, which could further drive demand in the coming months.

• Renewable Energy Capacity: Investors and analysts will be keen to hear any updates on capacity expansion in both renewable energy and thermal power. This remains a critical growth driver for companies like NTPC and Tata Power, which are focused on scaling up their renewable energy portfolios.

• Coal Prices and Power Production: Coal prices and power generation levels are expected to be key discussion points. While coal prices have stabilized, any potential volatility could impact the earnings of companies like JSW Energy and NTPC, which rely heavily on thermal power generation.

Conclusion: Mixed Outlook for Power Sector Stocks

As Q2FY25 earnings reports are released, power sector companies are expected to post mixed results due to moderate demand and stable fuel prices. While some companies, like Suzlon Energy and JSW Energy, are projected to show strong revenue growth, others, such as NTPC and Tata Power, may experience flat or declining profits.

However, despite these short-term challenges, JM Financial remains optimistic about the long-term prospects of the utilities sector, citing increasing power demand and policy support for capacity expansion. Investors are encouraged to keep an eye on the sector’s performance in Q2 and the evolving dynamics of power demand and renewable energy growth.

Disclaimer: This blog is for informational purposes only and should not be considered investment advice. Always consult a qualified financial advisor before making any investment decisions.