Power sector Q1 preview: Higher power demand, generation to boost profits

The corporate earnings season for the first quarter of the current financial year 2022-23 has begun with IT bellwether Tata Consultancy Services releasing its results on July 8. Power sector heavyweights Coal India and NTPC will also be delivering their Q1 financial report in due course, with their earnings likely to be boosted by high power demand during the April-June period due to intense heatwave in northern states.

According to a ICICI Securities report, all-India power demand rose 18.6% YoY to touch a new high of 216 GW during Q1FY23 as northern states reeled under the hottest pre-summer months in decades, boosting thermal plant load factors (PLFs) and power purchase by discoms, although high international coal and gas prices led to continued elevated exchange power prices. Generation was higher both for PSUs and private players, and the power purchase by discoms of listed companies was much higher due to the lower base (Q1FY22 was hit by the covid delta wave), resulting in higher revenues.

Analysts at ICICI Securities expect Coal India (CIL), the country’s largest coal miner, to report 58% year-on-year (YoY) rise in profit after taxes (PAT) at ₹5,000 crore, mainly due to growth in offtake and increase in average realisation. The key things to watch would be management guidance on FY23 production and offtake ramp-up to cater to the high demand. The updates on price hikes and coal imports will also be on investors’ radar.

As per the report, state-owned power transmission company NTPC is also projected to see growth in its profits due to higher capacity and better PLFs. The Q1FY23 revenues are estimated to increase 26% YoY as the company will benefit from high plant availability and gross generation (up 20.3% YoY) due to higher demand and incremental earnings from new capacity commissioned. NTPC’s standalone recurring PAT is expected to increase 10.9% YoY.

Among other PSU player, NHPC is also expected to report 7.8% YoY rise in PAT in Q1 FY23, while Power Grid’s consolidated recurring PAT is likely to increase 7% YoY and revenue to grow 6.1% YoY.

In the private sector, Tata Power is projected to post a 12.8% YoY rise in revenue in Q1FY23 on the back of increased generation and power demand in its distribution areas. EBITDA is expected to decline 4.1% due to higher power purchase and fuel costs, while adjusted PAT is likely to increase 76% YoY to ₹680 crore.

JSW Energy’s Q1FY23 consolidated revenues is expected to increase 25% YoY due to 4.7% higher consolidated generation, boosted by 14% higher generation of hydro plants and generation from the recently commissioned 225MW solar capacity. EBITDA is expected to increase 28% YoY. The profit is seen surging 95% YoY to ₹390 crore boosted by higher EBITDA, and lower interest expenses.

Torrent Power’s Q1FY23 revenue is estimated to be 15.5% higher YoY due to better performance of the distribution businesses, and despite lower generation YoY. On the operating profit front, EBITDA is expected to increase 17.5% due to higher revenues, while adjusted PAT is pegged to increase 47.6% YoY to ₹330 crore, on the back of higher EBITDA, and helped by the reduction in interest cost and a lower base in Q1FY22.