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Know Your Power
Market party: defensives invited, private IPPs left out
• Concerns weigh down sector performance: The power utility space
did not keep pace with improving market sentiment in March. Private
IPPs like Lanco, JSWE and Adani continued to underperform the
market, due to fuel availability and execution concerns persisting.
TPWR stood out, outperforming the markets and peers, due to its
unique combination of coal upsides and defensive power generation
portfolio. NTPC, another defensive, outperformed the market.
• Bilateral contract prices to range within Rs4-4.5 through the
summer; our FY12 average merchant price estimate of Rs4/unit
looks within range: Feb was a softer month than Jan, based on OTC
bilateral contracts (Rs4.07 vs. Rs.4.64 in Jan). New forward contracts
remained in contango which suggests a seasonal pick up through May
2011, and thereafter softer rates with the commencement of monsoon.
The YTD average bilateral contract rate of Rs4.85 is in line witrh our
Rs5 estimate for FY11.
• State utilities are still active in the merchant market: Feb power
demand rose 8.0%, slightly below Jan’s 9.4% but still above the 9
month trendline. We view this as a combination of seasonality and state
utilities stepping up to the plate.
• FY11 drawing to a close; NTPC and JSWE seem to account for
many execution slippages: Amongst projects planned in FY11, JSW’s
Barmer (8X135MW) and NTPC's (1GW added of 3.15GW target)
projects have been delayed. Trends now suggest: ~11-12GW cap-add
for FY11, vs 21GW govt target, and ~45GW 11th plan adds, vs 62GW
target.
• With improving market sentiment, we think there is room for beaten
down names (notably JSWE, Lanco, RPWR and Adani) to rally in
the short-term. However structural concerns on fuel availabilty would
limit sustained outperformance, in our view. Our top picks are TPWR
and PWGR (less affected by fuel concerns) and Adani (execution
strength).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Know Your Power
Market party: defensives invited, private IPPs left out
• Concerns weigh down sector performance: The power utility space
did not keep pace with improving market sentiment in March. Private
IPPs like Lanco, JSWE and Adani continued to underperform the
market, due to fuel availability and execution concerns persisting.
TPWR stood out, outperforming the markets and peers, due to its
unique combination of coal upsides and defensive power generation
portfolio. NTPC, another defensive, outperformed the market.
• Bilateral contract prices to range within Rs4-4.5 through the
summer; our FY12 average merchant price estimate of Rs4/unit
looks within range: Feb was a softer month than Jan, based on OTC
bilateral contracts (Rs4.07 vs. Rs.4.64 in Jan). New forward contracts
remained in contango which suggests a seasonal pick up through May
2011, and thereafter softer rates with the commencement of monsoon.
The YTD average bilateral contract rate of Rs4.85 is in line witrh our
Rs5 estimate for FY11.
• State utilities are still active in the merchant market: Feb power
demand rose 8.0%, slightly below Jan’s 9.4% but still above the 9
month trendline. We view this as a combination of seasonality and state
utilities stepping up to the plate.
• FY11 drawing to a close; NTPC and JSWE seem to account for
many execution slippages: Amongst projects planned in FY11, JSW’s
Barmer (8X135MW) and NTPC's (1GW added of 3.15GW target)
projects have been delayed. Trends now suggest: ~11-12GW cap-add
for FY11, vs 21GW govt target, and ~45GW 11th plan adds, vs 62GW
target.
• With improving market sentiment, we think there is room for beaten
down names (notably JSWE, Lanco, RPWR and Adani) to rally in
the short-term. However structural concerns on fuel availabilty would
limit sustained outperformance, in our view. Our top picks are TPWR
and PWGR (less affected by fuel concerns) and Adani (execution
strength).
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