Seven power stocks to track as Q3 earnings season kicks off
This phase is particularly crucial amid debates about slowing corporate earnings, as it provides a clearer picture of the overall economic health.
Among the various sectors, the power sector is expected to emerge as a standout performer in Q3, with industry experts projecting record earnings driven by key factors.
Bolstered by new transmission lines, capacity expansions, and improved hydro-generation, the sector is gearing up for a stellar performance. As state governments push for private investments and power demand surges ahead of an expected scorching summer in 2025, investors are set to keep a close watch on power stocks poised to light up the market.
Let’s dive into the details driving this momentum.
Tata Power
This Tata group company has transformed into India’s undisputed energy powerhouse. Tata Power is involved in everything-generating electricity, transmitting it across the country, distributing it to homes and businesses, and even trading power.
Tata Power’s generation segment focuses on producing electricity from hydroelectric and thermal sources, including coal, gas, and oil, through owned and leased plants, alongside providing ancillary services.
The company’s renewable energy segment focusses on power generation from wind and solar sources, complemented by related support services.
Recently, Tata Power shares have faced downward pressure, reflecting the broader market correction.
As a sector closely tied to industrial and commercial consumption, the power industry’s performance often mirrors the trajectory of economic activity and electricity demand.
Tata Power has been quick to embrace the shift toward renewable energy, diversification, and innovation. The company is actively investing in large-scale solar power projects and has also diversified into rooftop solar and battery storage solutions. Its expertise in solar energy has enabled it to secure high-value projects across India.
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Beyond renewables, Tata Power is also making strides in the fast-growing EV sector with investments in charging infrastructure.
As India increasingly turns to electric mobility, the company is poised to play a central role by providing reliable charging solutions that help accelerate the adoption of electric vehicles.
Coming to its financials, Tata Power’s business has grown at a robust pace. Between 2020-2024, the company’s sales and net profit have grown at a compound annual growth rate (CAGR) of 15.8% and 9.4%, respectively.
For the half year ending 30 September 2024, Tata Power reported a 5% YoY rise in revenue to ₹320.6 billion, up from ₹304.5 billion in the year ago period.
Its other operating income dropped by 3.7% to ₹2.1 billion during the same period.
Meanwhile, Tata Power’s net profit surged 41% in H1FY25 to ₹27.2 billion, up from ₹19.2 billion.
Currently generating 6.7 gigawatts (GW) from renewable sources, Tata Power is aiming to more than triple this capacity to 23 GW by 2030. It would be interesting to see how the company fares in the third quarter of FY25, given the decline in fuel cost.
JSW Energy
JSW Energy, the holding company for JSW group’s power business, primarily generates power from its power assets located in Karnataka, Maharashtra, Nandyal, and Salboni.
In 2024, the company re-organised its green (renewable) and grey (thermal) businesses. As a result of this re-organisation, all present and future renewable energy operations are housed under JSW Energy Neo, a wholly owned subsidiary of the firm.
In recent trading sessions, shares of JSW Energy have garnered a lot of investor attention following some acquisitions.
In December 2024, JSW Neo signed a definitive agreement with O2 Power to acquire 4,696 MW of renewable energy (RE) platform in a $1.47 billion enterprise value deal.
More recently, JSW Energy announced the acquisition of KSK Mahanadi Power Company, which owns 3,600 MW of thermal power plants. This company is currently under insolvency proceedings.
Coming to JSW Energy’s financials, the company’s net sales and net profit have grown at a CAGR of 5% and 20%, over the past 5 years.
For the September 2024 quarter, the company reported flat earnings with its net profit rising to ₹8.5 billion.
With the recent acquisition of KSK, JSW’s total thermal generation capacity has increased to 7.5 GW, and its total generation capacity to 28.2 GW. This brings the company much closer to achieving its target of 20 GW.
In 2024, JSW unveiled an ambitious growth roadmap, committing over ₹1 trillion to scale its power generation capacity to 20 GW by 2030. However, with accelerated progress and strategic execution, the company is now on track to achieve this milestone well ahead of schedule.
With a portfolio diversified across the entire power value chain, and the company’s efforts in emerging markets like green hydrogen and battery energy storage systems (BESS), JSW Energy could reap the benefits of its current investments for years to come.
Skipper
This small yet dynamic company has emerged as one of the world’s leading manufacturers of transmission and distribution (T&D) structures, including towers and poles, within its engineering products division.
Beyond T&D, Skipper has carved out a strong foothold in the polymer sector and established itself as a reliable partner for critical infrastructure EPC (engineering, procurement, and construction) projects.
With a global footprint extending across 40 countries—spanning South America, Europe, Africa, the Middle East, South and Southeast Asia, and Australia—Skipper has become a trusted name in the industry.
In India, the company enjoys a stellar reputation, serving as the preferred manufacturer from Jammu & Kashmir to Tamil Nadu and Northeast India to Gujarat.
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A standout achievement in Skipper’s portfolio is the Fatehgarh (II) to Bhadla (II) 765kV HEXA ZEBRA Conductor Transmission Line. This large-scale project included the supply, erection, civil works, testing, and commissioning for Power Grid Corporation of India, showcasing the company’s technical expertise and project execution capabilities.
This project is just one example of Skipper’s extensive portfolio of transmission tower initiatives. The company continues to be actively involved in key transmission infrastructure developments, ensuring the country’s power grid remains robust and efficient.
Despite all this, the company’s stock price has come under pressure in the past one month, following a sharp run-up in valuations and due to the overall correction in markets.
Coming to its financials, Skipper has posted significant growth over the last five years.
Between FY20 and FY24, its revenue and net profit have surged with an impressive CAGR of 11.9% and 21.2%, respectively.
The company has demonstrated consistent financial strength, with an average RoE of 5.2% and RoCE of 15.1%.
Looking ahead, Skipper has set an ambitious goal to scale its operations significantly, aiming at ₹100 billion topline by 2028-29.
The company aims to capitalise on the growing demand for transmission towers, especially in high-voltage direct current (HVDC) systems, which are critical for long-distance power transmission and the integration of renewable energy sources.
KEI Industries
Founded in 1968, KEI initially focused on rubber cables for house wiring. Now, the company produces high-demand cables such as EV, MV, LV, solar cables, and more.
KEI Industries has five manufacturing plants with a network of more than 1,900 dealers and distributors. The company exports its products to 60+ countries.
In recent trading sessions, shares of KEI Industries have come under pressure owing to the overall weakness in markets.
This fall could also be attributed to muted earnings for the second quarter. The company’s net profit rose around 11% YoY to ₹1.6 billion, but its margins dipped 0.4%.
The company is expected to post relatively better earnings in Q3.
Over the past 5 years, its net sales and net profit have grown at a CAGR of 14% and 26%, respectively.
The company is gearing up for major growth in FY25 and it recently raised ₹20 billion via a qualified institutional placement (QIP).
The company has planned a large greenfield expansion to tap into growing demand from domestic and export markets.
Going forward, the company’s strong order book and its presence in the growing wires and cables industry is expected to support the healthy growth.
Zodiac Energy
Zodiac Energy has a track record of more than a decade in providing end to end services including design, supply, installation, testing, commissioning and operational and maintenance of solar power assets.
The company executes residential, commercial & industrial rooftop and ground mounted solar power projects for non-corporate and corporate clients across 15+ states in India.
It has installed 130+ MW of solar projects for more than 12,000 clients so far.
After peaking in August 2024, shares of Zodiac Energy have come down in recent months, with no respite for investors.
Coming to its financial performance, Zodiac Energy boasts of a 28% CAGR in its sales and net profit over a 5-year period.
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The healthy financials are on the back of sustained order book execution.
Going forward, the growth could pick up as it has a healthy order book of ₹4.3 billion. This is almost twice its FY24 revenue. These orders are expected to be executed within the next 6 to 12 months.
Moreover, Zodiac Energy was recently awarded with its first international rooftop order from Zambia.
This order included design, engineering, supplying, installing, testing, and commissioning of grid tied 2 MWpr rooftop solar system turnkey with battery energy storage system (BESS).
Following upbeat earnings in Q2, the company could possibly continue the momentum in Q3.
KPI Green Energy
Over the years, KPI Green Energy has emerged as a notable player in India’s renewable energy landscape.
The company operates across diverse segments, including power generation as an independent power producer (IPP), turnkey solutions for captive power producers (CPP), and solar power projects on industrial plots leased for energy ventures.
As of H1FY25, KPI Green has energised an impressive 127 MW of IPP capacity, 44 MW of hybrid IPP, 299 MW of CPP, and 37 MW of hybrid CPP—underscoring its extensive expertise in solar energy.
Notably, its hybrid projects, which integrate solar and wind power, offer innovative and sustainable energy solutions.
However, recent trading sessions saw KPI Green’s shares under pressure, potentially influenced by its recent bonus issue.
Coming to its financials, the company’s sales and net profit have grown at a CAGR of 97% and 77% respectively, over the past 5 years.
This incredible growth is due to higher execution of captive power plant and higher EPC orders, along with the commissioning of additional IPP capacity.
KPI Green Energy is geared for growth in FY25, post the recent fund-raising of ₹10 billion via the QIP route. These funds were primarily used to prepay the entire outstanding debt.
Some proceeds were used to meet the equity requirement of the recently awarded utility scale independent power producer (IPP) projects.
KPI Green has set ambitious targets to complete some CPP orders within the next 12 to 15 months, while the new IPP orders are expected to be fully executed by mid-FY27.
The company’s order book continues to grow, and it stands at ₹32.8 billion as of December 2024. This includes a massive order worth ₹13 billion from Coal India and a ₹5.3 billion order from Maharashtra State Power Generation Company.
Transrail Lighting
Transrail Lighting, a relatively newer player on the bourses, is making its mark as an engineering and construction company specialising in power transmission and distribution.
The company manufactures lattice structures, conductors, and monopoles, offering a comprehensive range of services, including the supply, engineering, procurement, and construction of transmission and distribution lines.
In addition, Transrail provides EPC services in civil construction, covering designs for bridges, tunnels, elevated roads, and cooling towers. It also operates in the poles and lighting segment, offering supply, installation, and testing services, alongside its involvement in railway services such as overhead electrification, signalling, telecommunication, earthworks, and track linking.
Transrail Lighting’s shares debuted with a solid 36% premium, listing at ₹590.
During its IPO, the company got a lot of attention from investors, given the hype surrounding power transmission theme. The IPO received overall subscription of 80 times.
Coming to its financials, between FY22 and FY24, Transrail’s revenue nearly doubled, while net profit tripled. The EBITDA margin improved to 11.7% from 8.8% during the period while net debt-equity ratio fell to 0.6 from 0.7.
Over the past 5 years, its sales and profit have grown at a CAGR of 16% and 22%, respectively.
Going forward, Transrail Lighting has laid out a comprehensive strategy to strengthen its position as a leading infrastructure turnkey solutions provider.
To broaden its geographical footprint, the company aims to strengthen its presence in regions such as West Africa, East Africa, SAARC countries, Southeast Asia, Latin America, and the Middle East, with potential plans to explore the Australian market.
Furthermore, the company is expanding its pole and lighting business by diversifying into various product categories, positioning itself for growth in an increasingly competitive market.
In the coming quarters, the company is expected to post good growth on the back of healthy order book and execution of the same. The order book stood at over ₹102 billion as on June 2024.
Snapshot of top power stocks
Here’s a table showing some of the top power companies in India along with some important parameters –
In Conclusion
India’s power sector is one of the most diversified globally, spanning electricity generation, transmission, distribution, storage, renewable energy, and transportation electrification.
With rising electricity demand driven by data centers, EV infrastructure, and new technologies, significant capacity additions are essential. This demand-supply mismatch creates recurring long-term investment opportunities.
The power sector is poised to play a pivotal role in shaping India’s economic growth. However, investors should monitor companies’ order execution, capital allocation, governance, and market dynamics.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com