“With a focus on achieving energy security and self-reliance (atma nirbharta), coupled with regulatory advancements, improved technology, and reduced costs, a substantial shift is underway across all aspects of energy—from generation and transmission to distribution and consumption. This transition is expected to give rise to numerous new multibillion-dollar enterprises over the next decade,” says Sachin Shah, Fund Manager, Emkay Investment Managers.
India’s total installed energy capacity has now reached 442 GW, with renewables comprising about 33% and hydro contributing 11% as the share of coal in India’s total installed capacity has fallen below the 50%-mark for the first time.
The shift in the energy landscape is making investors chase green energy stocks. Shares of KP Energy have rallied around 599% in the last one year, KPI Green Energy 455% and WAA Solar 422%. Other top multibaggers include SJVN, BF Utilities, Orient Green Power Company and NHPC.
Why green energy?
Green energy stocks are primarily those related to the renewables energy ecosystem like solar, wind, hydro, etc. The sector is in limelight as India has an ambitious target of reaching 500 GW of non-fossil fuel capacity by 2030. The revised target is 50% of its energy requirements from renewable energy by 2030.
In 2023, India spent $30 billion on green capital expenditure which Morgan Stanley expects to grow to more than $400 billion cumulatively in the decade 2022-32.
Stating that power transmission is key to India’s energy transition and global new energy cost leadership ambitions, Morgan Stanley analysts are betting on Power Grid.
“We view Power Grid as the largest beneficiary of our transition-linked grid capex estimate, which think the stock is not fully pricing in. Additionally, with Power Grid’s large balance sheet, low cost of debt and strong annual FCF generation, we estimate it could fund 30% of India’s grid capex by FY32E without reducing dividend payouts. We also think a cost of equity reduction led by beta compression could be another catalyst for stock re-rating,” Apoorva Bahadur of Morgan Stanley said.
The global brokerage firm has a target price of Rs 355 on the stock.
The recently-announced rooftop solar scheme under the Pradhanmantri Suryodaya Yojana with an aim to install rooftop solar power systems for 1 crore households in India is also a big trigger for solar panel manufacturers.
“A typical rooftop solar panel requires solar panel (30-35% of total cost), followed by solar inverter (10-15%), Cables (8-12%), Metering and coordination with power distribution authorities and transportation/fabrications and other incidental labour charges. Thus, solar panel companies, including companies Waaree Energies/Renewables, Premier Energies, Insolation could see potential incremental revenue up to Rs 150 billion over next 3 years from rooftop solar segment for households,” JM Financial said.
Investors see opportunity in the green energy sector for the next 10-15 years. “The kind of investment that is happening on the solar and wind side, companies like Suzon Energy and Inox Wind will benefit. In the smart metering space, we can have a manufacturer like Genus. Then on the HVDC side and transmission substation, ABB and Siemens will get benefit. Then, on the thermal side, Thermax and BHEL will be in focus,” said Rupesh D Sankhe of Elara Capital.
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
