Jefferies’ Top Power Picks Include Maharatna PSU, Bearish on Tata Power

By Malvika Gurung

Investing.com -- The global brokerage and research firm Jefferies (NYSE: JEF ) has initiated coverage on the Indian power sector, stating that restriction and increased duties on module imports and module price volatility, along with state electricity boards (SEBs) taking time to sign new power purchase agreements (PPA) are impacting growth in the sector.

Domestic brokerage and research firm HDFC Securities expects the power industry to post a 28.5% YoY earnings growth, led by improved coal availability as well as strong generation growth.

Jefferies' top picks in the power industry include the state-owned electric major Power Grid Corporation of India (NS: PGRD ), NTPC (NS: NTPC ) and JSW Energy (NS: JSWE ). Meanwhile, the brokerage firm is bearish on the large-cap Tata Power (NS: TTPW ) and Indian Energy Exchange (NS: IIAN ).

On the Maharatna PSU PowerGrid, Jefferies has initiated a Buy tag on the back of advancing bid pipeline, increased dividend and asset monetisation, along with entry into smart metering, EV charging and distribution business. A target price of Rs 260/share is set on the stock, an upside of 22.8% from the current share price.

Jefferies has Buy tags on NTPC and JSW Energy too, with target prices of Rs 195/share and Rs 315/share, respectively, upsides of 17.5% and 14.3%, respectively.

On Tata Power, Jefferies has an Underperform rating amid concerns of medium-term ROE being below the cost of capital on the power asset basket. Mundra tariff hike resolution is not seeing a favourable stance from SEBs yet, noted the brokerage as cited by Mint.

It has set a target price of Rs 180/share on Tata Power, a downside of 12.3%. On IEX, the global brokerage has set an Underperform tag, with a target price of Rs 115/share, a downside of 18.6%.