Power demand surge to keep NTPC, Coal India, PowerGrid in limelight: Mayuresh Joshi

"These players might remain in focus as we speak at least from a PSU perspective. From the private perspective obviously players like a
Tata Power
,
Adani Power
should remain in focus. But again, power EPC players might also remain in focus to a large extent," says
Mayuresh Joshi
, Head Equity, Marketsmith India.
Let me actually talk about the power space only with you. Given the fact that you now have the government actually writing to states and also asking the states to make sure that you have the adequate power supply and given the fact that we are going to hit the peak of the summer season which means that the demand for power will only increase given the fact that you will see rise in temperature. How are you actually gauging the entire power space at this point in time?
Mayuresh Joshi:
So, three aspects, you have got power generators, you have got power transmitters, and then you have got the power EPC players as well. Now, when it comes to the generators, the expectation is that with summer coming around, the expectations in terms of peak power demand and peak power loads is going to be significantly higher over the next few weeks and the next couple of months.
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And therefore, stocks like an
NTPC
, for example,
Power Grid
as an example also is a transmitter with grid transmission lines and capex to capitalisation remaining extremely stable for both these companies, having decent dividend yields along with Coal India, the expectation largely is that with peak power demand expected to surpass record levels this time around, expectations of thermal coal coming back very-very strongly at this juncture, actually mean that the blended realisations for
Coal India
might be relatively better and also let us not forget the dividend yield is significantly higher compared to a lot of players.
So, these players might remain in focus as we speak at least from a PSU perspective. From the private perspective obviously players like a
Tata Power
,
Adani Power
should remain in focus. But again, power EPC players might also remain in focus to a large extent.
So, let us not forget that over the next few years as India is expected to transition quite significantly specifically in the renewable space, the FGD space as well where critical thermal polluting plants might need equipment to probably ensure that they are running with more desulfurization and therefore the EPC players including the likes of
BHEL
. As a space it looks attractive with government initiatives, government capex. The entire renewable theme is expected to get pushed over the next few years, this is one mega theme that investors can probably look at.
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What is the pecking order like now given that all the big four are out with their numbers within banks that is,
ICICI Bank
, HDFC, and the disappointment that we saw from SBI as well as Kotak.
Mayuresh Joshi:
So, the bias still remains with ICICI Bank/Axis Bank because as a disclaimer we continue holding these stocks in both our domestic as well as global portfolios. Results were in line with estimates.
The commentary was again in line with estimates and again a large part of the expectations from analysts is that over the next few quarters as we head into an interest rate cut cycle, the nims and spread should benefit quite significantly.
Consciously even if you read through
HDFC Bank
's commentary, the underwriting on advances growth has been consciously lowered to a large extent because they want to focus specifically in terms of both the cost to income as well as their asset quality on the balance sheet which has improved quite significantly over the last few quarters.
The risk weighted assets as a percentage of their balance sheet. All these three banks probably carry are significant in terms of providing growth and impetus to the balance sheet compared to the rest of the bank.
So, these three remain probably on top of our radar. Now, State Bank in my own personal opinion it was not a disappointing set.
Earnestly if you probably look at how the advances growth has been, the cost to income ratio has been settled around 35 bps odd, the expectation is that asset quality pressures which have come off quite significantly with GNPA is at 1.82, net NPAs at 0.67 odd, they should come quite significantly or remain in an enhanced mode in terms of efficiency coming down as every passing quarter comes through and therefore from the public sector banks State Bank. So, the top large leadership banks is something that we continue to remain and keep our focus on.

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