Power Sector has been lagging for some time. However, it is showing signs of recovery in the last couple of years. There is an increase in power consumption in several states like Uttar Pradesh, Madhya Pradesh, Bihar etc., Many experts believe that the power sector is expected to well in the next 1-2 years. How was the performance of power sector in the last few years? Which are the top 5 Power Sector Stocks to buy for amazing returns in 2019? Who should invest in these power sector stocks?
How was the performance of Power sector in the last few years?
Among the BSE Utility Index, more than 60% of the stocks has given negative returns in the last 2-3 years. This is due to the fact that there is an excessive power supply, low prices on power exchanges and due to lack of proper power purchase agreements. All these facts have been creating uncertainty in power sector, which has been sluggish over the past few years.
What has changed now in Power Sector?
Many stock market experts believe that the downturn in the power sector is over and it is in recovery path now. This is due to the fact that there is extended gap between demand and supply of power. Many large states like Uttar Pradesh, Madhya Pradesh and Bihar have increased power consumption. Since the power sector was on bearish stage, the power sector stocks were under performing all along. At current stage these power sector stocks are available with attractive valuations. Many experts believe that under current volatile stock markets, power stocks can work as defensive stocks for investment.
Top 5 Power Sector Stocks to buy in 2018-2019
Top-1 # Tata Power – CMP Rs 71 and Target Price Rs 92 – Upside 30%
Company Overview: Tata Power is the largest power generation company in India aimed at providing uninterrupted power supply from its various plants located across India.
This stock was trading at Rs 82, 1 year back and currently trading at Rs 71 indicating a 15 % negative return.
This stock was trading at Rs 75, 1 month back and currently trading at Rs 71 indicating a 7 % negative return.
Few days back, the high powered committee has recommended for relief to Tata Power and 2 other companies for Rs 1.29 Lakh Crores on stranded power projects. If these recommendations are implemented by government, those 3 companies would benefit for next 30 years. https://www.moneycontrol.com/news/business/panels-recommendations-may-bring-rs-1-29-lakh-cr-relief-to-gujarats-3-stranded-power-projects-3036741.html
Many experts believe that such signs are going to boost power sector and to companies like Tata Power.
Top-2# CESC – CMP Rs 907 and Target Price Rs 1,132 – Upside 25%
Company Overview: The Calcutta Electric Supply Corporation or CESC is the Kolkata-based flagship company of the RP-Sanjiv Goenka Group. Currently it is in power and retail segments.
This stock was trading at Rs 1,031, 1 year back and currently trading at Rs 907 indicating a 12 % negative return.
This stock was trading at Rs 976, 1 month back and currently trading at Rs 1,132 indicating a 7 % negative return.
Recently, the company has decided to demerge its business into the power and non power supply and date of record is 31st October, 2018. The split business would list in Dec-2018. This move would unlock the power business of the company. Positive signs of power sector would also add value to such stocks.
You may like: Best IT Mutual Funds to invest now in 2018-19
Top-3# NHPC – CMP Rs 24 and Target Price Rs 30 – Upside 25%
Company Overview: NHPC Limited is an Indian Hydropower generation company that was incorporated in the year 1975 with an authorized capital of Rs. 2000 million and with an objective to plan, promote and organize an integrated and efficient development of hydroelectric power in all aspects.
This stock was trading at Rs 28, 1 year back and currently trading at Rs 24 indicating a 13 % negative return.
This stock was trading at Rs 24.2, 1 month back and currently trading at Rs 24 indicating 0.6% returns.
In Sep-18, Motilal Oswal has recommended this stock for target of Rs 33. This is one of the lowest priced power sector stock in India.
Top-4 # NTPC – CMP Rs 161 and Target Price Rs 200 – Upside 24%
Company Overview: NTPC Ltd., is an Indian Public Sector Undertaking, engaged in the business of generation of electricity and allied activities.
This stock was trading at Rs 175, 1 year back and currently trading at Rs 161 indicating a 7 % negative return.
This stock was trading at Rs 169, 1 month back and currently trading at Rs 161 indicating a 4 % negative return.
Some of the stock market experts like Arihant Capital and Shabbir Kayyumi has recommended this stock for a target price in the range of Rs 186 to Rs 213.
Top-5 # Power Grid Corporation – CMP Rs 189 and Target Price Rs 230 – Upside 22%
Company Overview: The Power Grid Corporation is an Indian state-owned electric utility. POWERGRID transmits about 50% of the total power generated in India on its transmission network. It is Navratna company.
This stock was trading at Rs 210, 1 year back and currently trading at Rs 189 indicating 10% negative returns.
This stock was trading at Rs 198, 1 month back and currently trading at Rs 189 indicating a 4 % negative return.
In Aug-18, Prabhudas Lillandher has recommended this stock for target of Rs 230. 4 months back, JM Financial and Edelweiss has recommended for a target price of Rs 235 and Rs 240 respectively.
Who can invest in these power sector stocks?
Power sector has been under performing for the past few years. Currently power sector stocks have started reviving. That does not mean that these are safe stocks to invest now. These are still high risk, high return stocks. If you are high risk taker, you can invest in these stocks for 1-3 years time frame.
Should you invest in these power stocks now?
The straight answer is NO. Currently stock markets are volatile. You can check for each and every dip in the stock market and start accumulating these stocks.
Disclaimer: I do not own any of these stocks as on the date of writing this article. However, I may purchase such stocks any time like normal investor.
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
Top 5 Power Sector Stocks to buy in 2018-2019
- SBI Life eShield Next Term Plan – Features, Benefits and Review - October 18, 2021
- Aditya Birla Sun Life NASDAQ 100 FoF (NFO) – Should you invest? - October 15, 2021
- ITI Pharma and Healthcare Fund Review – Is this NFO late in this bull run? - October 14, 2021