Power Demand Drives Utility Stocks As High As 78%
Analysts see power demand growing in future—which benefits players in the thermal and renewables space.
Power utility stocks have been standout performers this year, fuelled by a surge in power demand during the first quarter of 2025. Market leaders within these indices have seen their share prices skyrocket as investors anticipate continued growth in the sector.
India's S&P BSE Utilities Index surged over 33% year-to-date and the broader MSCI Asia Pacific Utilities Index is also up over 14%, on track for its best annual performance since 2006.
Here's All You Need To Know About The Power Utilities Sector's Performance in 2024:
Stock Performance
The S&P BSE Utilities Index is designed to provide investors with a benchmark reflecting BSE AllCap companies that are classified as members of the utilities sector. The index has 28 constituents and the top 10 constituents hold over 88% weightage in the index.
The index is up over 33% year to date and over 86% in the past year itself. Among its top 10 constituents, Torrent Power, JSW Energy, and Power Grid Corp. have been the top gainers year to date, with stock prices up 42–78% in 2024.
What Powered The Rally?
A scorching summer and a thriving economy combined to create a perfect storm of electricity demand in India during 2024. Peak power consumption hit a record-breaking 250 GW in May, according to the Central Electricity Authority.
This surge in demand has been a boon for power utilities. Companies across the thermal and renewable energy spectrum have seen their order books swell. Traditionally, thermal-focused giants like Tata Power, Adani Power, CESC, and JSW Energy are now aggressively expanding their renewable energy portfolios to capitalise on India's green energy push. Meanwhile, grid infrastructure company Power Grid Corp. is benefiting from the government's Green Energy Corridor initiative, which aims to integrate renewable power sources into the national grid.
How Did Q1 Earnings Fair?
The utilities sector also saw strong earnings growth in the June quarter. As per Citi, the sector's sales growth stood at 8.8% in Q1, surprising expectations by 1.3%. The Ebitda and net profit growth stood at 16% and 29%, respectively, on a year-on-year basis, states Citi.
As per Nuvama, the power sector's top line grew 13% year on year in Q1 FY25 vs. 3% in FY24.
Looking Ahead
The International Energy Agency predicts an 8% rise in electricity consumption in India for 2024, matching the rapid growth seen in 2023.
Elara Capital anticipates that increasing penetration of air conditioners, data centres, railways, electric vehicles, and urbanisation will drive power demand up by a compounded annual growth rate of 7% from FY25 to FY32. This sustained growth is expected to translate into significant investments in the transmission sector to accommodate the surge in renewable energy generation, states the brokerage.
Nuvama Research expects the rising peak deficit to keep on adding to India's dependence on thermal and gas plants. This is positive for thermal players like NTPC, Tata Power, Adani Power, and JSW Energy. The brokerage also expects accelerated ordering of thermal, renewable and transmission capacities, which benefits players like NTPC and Power Grid Corp.
Valuations
Additionally, estimated forward valuations for the current fiscal of companies like NTPC, Power Grid Corp., Adani Energy Solutions, Torrent Power, JSW Energy, NHPC, Tata Power, SJVN and CESC stand significantly lower than current levels, indicating strong earnings growth.
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