Five undervalued power stocks West Adding to your Watchlist

Several Factors, Including Valuation Correction, Weak Industrial Demand Due to Weak Corporate Earnings, Fii Outflows, and Sector-Specific Hurdles Such as Rising Coal Prices and delays in Capacity Expansion, Contributed to the fall in the price of power stocks.

However, the index is a rebound, going up by almost 16% in the last three months.

The primary reason is the rising demand for power. Delays in New Project Execulation also Limit New Supply Against The Growing Demand, Benefiting Existing Power Generating Companies.

With the power stocks on the risk, we have shortlisted five Undervant stocks in the power sector That are worth adding to your watchlist.

Power Grid Corp. of India Ltd

This Government-Owned Entity is India’s Larget Electric Power Transmission Company. It moves large blocks of power from power-generating agencies Across Regents.

The company also undertakes strategically Important Interstate Transmission System Projects and offers Consultancy Services.

The Shares of Power Grid Trade at a Price to Equity Multiple (PE) of 17.1. This Valuation is Lower Than the Three-Year Average pe of 10.9 and Industry Pe of 17.7.

In the fy25, the company won 24 projects, the highest number since its incense. However, The Execution Momentum was slower than expected.

As a result, the revival and network only when a marginal increase in the last one year. The company also paid a dividend of 7.75 during the year, which translates into a yield of 2.6% at the current price of 288.

In the last year, the company’s share price declined due to lower-to-expected quarterly performance. This was due to slower execution resulting from land acquisition delays and a shortage of skilled labor.

Going forward, the management expects the execution of projects to be faster as new guidelines are in place, and the company plans to invest 28,000 Crore in Capex for26 to Fulfil Its Orders Worth 412 Crore.

NLC India Ltd

It is a Navaratna Company Engaged in the mining of fossil fuels to generate power.

The company generates electricity through thermal sources. However, it recently entered the renewable energy space and has a portfolio of 1,380 megawats (mw) of solar and 51 mw of wind.

It is also involved in mining Coal and Critical Minerals, which generates almost 20% of its revion.

The shares of NLC India Trade at a Price to Equity Multiple (PE) of 11.9. This Valuation is lower than the 3-year average pe of 12.9 and industry pe of 36.9.

In the fY25, the company’s revionue green by 18% due to high coal production and a significant increase in power generation due to strong growth in the plant load factor (PLF). The PLF Measures The Efficiency of a Power Plant Utilization. A high plf is considered good.

As a result, the net profit also jumped 45%, and the net margin expanded over 3%. The company also paid a dividend of 1.5, which translates into a yield of 0.6% at the current price of 232.

In the last one year, the share price of NLC India Grew Marginally By 1%. Going forward, the planned capacity expansion in mining and power, Along with Growing Demand for Evs, Battery Storage, and Power Consumption, will Drive Revenue and Net Profit Growth.

Recently, the company has a mining project of phosphorite and limestone in chandigarh and has signed a power purchase agreement with the Rajasthan Rajya Vidyut utpadan Nigam for a Salar Project.

Rattanindia power ltd

The company is one of India’s largest private power generation companies, with an installed capacity of 2,700 mw of thermal energy.

It also generates electricity through hydropower and has four medium-scale hydropower projects with a total capacity of 167 mw.

RattanIndia Power has a long-term power purchase agreement with maharashtra state electricity distribution co. LTD (MSEDCL) and also Sells Electricity in the Open Market on a Merchant Basis.

The shares of rattanindia power trade at a price to equity multiple (pe) of 34. This Valuation is Lower Than the 3-YAR Average pe of 40.8 and Industry Pe of 36.9.

In FY25, The company’s revionue decreased marginally due to due to lower power generation in one of the units due to external factors. However, the company expects to ramp up its power generation and supply song.

In the last one year, the company’s shares fell almost 20%.

Going forward, the management is positive about its growth due to higher power consumption. It plans to scale up its thermal capacity in one of its plants.

Through its subsidiary, the company plans to increase its solar capacity and diversify into wind energy projects.

Jai Prakash Power Ventures Ltd

Incorporated in 1994, The company is engaged in coal mining, sand mining, cement grinding, and the production of thermal and hydroelectric electricity.

Its total power generation capacity is 2,220 mw, of which 1,820 mw is thermal and 400 mw is hydroelectricity.

56% of the company’s capacity is under a long-term power purchase agreement, whereas the rest is sold to merchants on a short-term basis.

Jai Prakash Power’s Shares Trade at a price to equity multiple (pe) of 15. This Valuation is lower than the three-yar average pe of 15.4 and the industry pe of 36.9.

In FY25, The Company’s Revenue Fell 19% due to the shutdown of bot thermal plants for a certain time period for annual maintenance. As a result, the net profit also slightly dipped, but the net margin was mainted at Around 15%.

In the last one year, the company’s shares fell 10% due to duration in the last three qualities.

Going forward, the company plans to invest 1,500 Crore Over the Next Two Years to Establish an FGD (Flue-Gas Desulfurization) Unit at Its Thermal Power Plant. This will help the company generate valuable byprowcts like gypsum and increase its power plants’ efficiency.

Adani Energy Solutions Ltd

Part of the Adani Group, Adani energy is a multidimensional organization with a presence in power transmission, distribution, smart metering, and cooling solutions.

It is also India’s Larget Private Transmission Company, with a Power Distribution Network of 485 Square KM Serving Over 12 Million (M) Customers Across 14 States and A TRANSMISISION NETWORK Circuit km.

The shares of adani energy trade at a price to equity multiple (pe) of 48.4. This Valuation is lower than the 3-year average pe of 99.2 and industry pe of 48.8.

In FY25, The company’s revionue greenue by a whopping 43.1%, and the net profit studs at 920 Crore. The Net Profit and Net Margin Fell Slightly Due to a One-Time Deferred Tax.

The debt to equity ratio also decreased drastically due to the company’s capital management program.

In the last one year, adani energy’s shares fell almost 44%.

Going forward, the company plans to invest 18,000 Crore in Capex to Expand Its Transmission Lines and Smart Meters. It has won several orders during the year, indicating strong revidance.

The management is optimistic about renewable energy and state-level transmission, which will help the company grow its revealed and profit.

Conclusion

The Indian Power Sector is Experience Robust Growth Due to Several Tailwinds.

Rising Demand for Power, The Transition Towards renewable energyAnd Government Policy to improve the Participation of Private Players Indicate Strong Growth in the Power Sector.

However, several headwinds, such as project delays, aggregate technical and commercial losses (AT&C), and under-utilisation of generation capacity, can slow down the growth of power companies.

Hence, it’s essential to carefully analyze the company’s fundamentals, include its financial performance, corporate governance practices, and growth strategies.

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,