Q1FY12 Result Review - Power Sector ::Unicon

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Q1FY12 Result Review – Power Sector

Ø  The total installed capacity of power in India stands at 172 GW as of Feb 2011. Growth of power demand is expected to remain strong at 9% CAGR over FY10-17E, according to Central Electricity Authority (CEA), which necessitates substantial investment in power generation, distribution and transmission capacities.

Ø  India which ranks 5th in the world in terms of total installed capacity, has one of the lowest per capita demand in the world. The National Electricity Policy (NEP) stipulates "power for all" and annual per capita consumption of electricity to rise to 1000 units by 2012.

Ø  After failing to meet its target of adding 75000 MW in the 11th five year plan, India has set a target of setting up 100000 MW for the 12th five year plan to meet the ever increasing demand for power in the country.

Ø  The peak demand is expected to grow at a CAGR of 7.8% in the 11th Plan as compared to growth in supply expected around 6.8% to 7% resulting in continued upward trend of power deficit in India.

Ø  64.8% of this is contributed by thermal power, 21.7% by hydro, 10.7% by renewable sources and the remaining 2.8% by nuclear.

Recommendations: From a long term perspective, we recommend L&T, BHEL and Thermax in the large cap segment. Among midcaps KEC International and CESC Ltd look attractive at current levels. However, Project execution delays, slow order inflows and high interest rates would continue to affect sector growth in next few quarters.

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Unicon Wealth Research