The volatility of coal prices will not affect Indian energy much; Positive on Tata Power, Ntpc: Iifl

China’s all-powerful economic planning agency embarked on the country’s energy crisis on Wednesday, trying to reassure residents and businesses in areas hardest hit by the shortages that it is closely monitoring the situation of. coal use and supply. The state planner, the National Development and Reform Commission (NDRC), said it has asked local governments to closely monitor the use and stocks of coal in power plants and improve execution. medium and long term contracts for the supply of thermal coal.

A shortage of coal supplies, tougher emission standards and strong demand from manufacturers have pushed coal prices to record highs, causing widespread restrictions on use while clouding prospects for economic growth. Electricity stocks have rallied in trade, fueled by the global energy shortage.

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In an interview with CNBC-TV18, Harshvardhan Dole, vice president of institutional equities at the IIFR, said: “The rally in stock prices is due to a couple of fundamental issues. Firstly, Indian power companies generally operate on a graduated hourly model, in which all input costs are passed on and these companies earn a fixed rate of return, to this extent, they remain largely insulated from the volatility of underlying coal prices. . Thus, to this extent, the rise in the price of coal did not affect them much. Second, if you take a look at the macroeconomic developments that have taken place over the past few months, it builds the confidence of the entire investment community. For example, the government took a bold step and scrapped the tripartite agreement, never to my knowledge in the past decade has such a bold step been taken by the government of India. In my opinion, this goes a long way in assuring investors that the government is serious enough in terms of implementing policies. “

About Coal India, Dhole said, “I am not covering Coal India, but in general the strong dividend yields offered by these PSUs indicate that there is no downside and there is more. more benefits for the PSU as a basket. “

About Tata Power, he said: “This is an action that we love, mainly because it takes pragmatic steps to ensure that the opportunities that emerge from green energy are well placed to seize this. For example, they are very excited to establish or expand their renewable energy portfolio. They are also aggressive enough to exploit elite opportunities coming from EVs, such as EV charging, smart meters, etc., which we don’t see in other private players. These steps they are taking lead us to believe that this is more of a structural story, which will unfold over the next three to five years, rather than the next two quarters. “

Regarding electricity stocks, Dhole said, “From a production perspective, we continue to love NTPC. If the renewable theme is really going to play out, then Power Grid is one of the biggest beneficiaries, because it will have to lay the transmission line, and it will have to carry the electricity that has been generated by these green plants, we like that. When it comes to private utilities, we like CESC and Torrent Power the most, given that they are more distribution-centric and these companies are one of the best-placed companies in terms of distribution reforms though. they are implementing their revenue models. This is how we play the sector. “

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(With contributions from Reuters)

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(Edited by : Dipika)

First publication: Sep 29, 2021, 11:16 AM STI