Power companies likely to record strong earnings for Q3

Power companies are likely to report strong earnings for the third quarter of the current financial year owing to the growth in regulated equity from capacity expansion, new transmission line additions, improved hydro generation, and sustained volume growth in the short-term market, as per analysts.

Additionally, contributions from solar EPC (engineering, procurement, and construction) and rooftop installation is likely to aid in the growth in earnings. 

“We retain our positive outlook on NTPC, driven by increased regulated equity from thermal capacity addition, on CESC for its strategic shift towards renewable energy, and on NLC, for its expanding project portfolio,” said Elara Capital in its quarterly preview. 

The brokerage noted that power generation has increased by 3% on year to 429 billion units (BU) in Q3FY25, driven by the onset of winter, which led to lower power demand. Peak power demand in the quarter under review remained steady at 224 gigawatt (GW), down 10% from the record highs of 250 GW in May 2024. 

“We expect NTPC’s regulated equity to remain Rs 89,400 crore in Q2FY25E vs Rs 82,100 crores in Q3FY24E. NTPC earns an assured return on its regulated assets. We expect a healthy quarter with a revenue and PAT (profit after tax) to rise 5% and 4%, respectively, on increase in regulated equity,” Elara Capital said.

NTPC commissioned around 155 MW of solar capacity in the third quarter of the current fiscal. It registered an increase of 3.82% on year in increase in generation. 

“The company is a play on energy security as well as transition. It is slated to be a key beneficiary of the government’s 80 GW thermal capacity addition target,” said the brokerage.

The firm expects revenue and PAT of Power Grid Corporation of India to increase 4% and 5%, respectively in the quarter under review on the back of commissioning of new transmission lines and substations.

Tata Power is also expected to register a growth of 11% on year in its net profit likely to record a 13% on-year jump.

“Hydro generation posted robust generation growth in Q3FY25 increasing 27%, 31% and 24% in October, November and December, respectively,” Elara Capital said. “Overall, for Q3FY25, hydro generation rose 27% on-year.”

Given no new hydro capacity has been added by state-owned NHPC, the firm expects the company’s regulated equity to remain stable at around Rs 12,900 crore. “NHPC earns returns on its regulated assets and incentive income based on plant availability & design energy. Revenue and PAT are likely to increase 7% and 8%, respectively,” the preview said.

Analysts note that global coal prices have corrected significantly due to oversupply and weak demand in China. Indonesian coal prices are hovering at $123 per tonne vs $127 per tonne last year. “We expect eAuction premium to remain in the range of 65-70% in Q3FY25E,” the report said.

For Coal India, Elara Capital expects revenue to increase by 1% on-year and net profit by 5% in the quarter under review. Coal India’s production increased by 1.5% to 202 million tonnes in Q3FY25. Its offtake increased 1.5% to 194 million tonnes in the quarter.