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* High rainfall across the country in April dampens power demand: The softness in power demand in Mar-23 spilled into Apr-23 (down 2.7% YoY) too, due to erratic rains across the country. All-India rainfall over the last 10 days of Apr-23 (19-30 April, 2023: 27.4mm) was higher vs the similar Apr-22 timeline (19-30 April, 2022: 11.7mm). Major cities across India have not reached the peak temperature that they experienced in the summer of FY22. Thermal/Nuclear generation clocked at -0.2%/-1.4% YoY and 4.2%/2.2% on 4-year CAGR basis. Hydro generation was down 25% YoY and lower by 6% on 4-year CAGR basis. Generation stands at 4- year (Apr 2019-Apr 2023) CAGR of ~3.9%, on the back of 4.2%/10.3% 4-yr thermal/RE generation CAGR.

* NTPC (BUY; TP: Rs200): For Apr-23, NTPC (SA) logged a ~2.3% YoY fall in generation. NTPC’s thermal units posted ~81% PLF in Apr-23 (PLF of 83% for Apr22 and 76/71% for FY23/22). NTPC would add ~17GW of projects (thermal, hydro, RE) over coming 3 years. We maintain our SoTP-based Mar-24E TP of Rs200/sh.

* NHPC (BUY; TP: Rs51): Generation for NHPC (SA) fell by ~20% YoY for Apr-23. NHDC registered a significant fall of ~82% YoY in the month. We maintain our Mar24E TP of Rs51/share for NHPC, based on SoTP methodology. NHPC has ~7.5GW of projects in various stages of construction (incl. subsidiaries/JVs). The underconstruction hydro projects are: i) 2,800MW hydro projects (Subansiri Lower 2,000MW and Parbati II 800MW), for which cost is anticipated at Rs311bn; these are expected to be commissioned within the next 12 months and will add ~Rs16bn to NHPC’s annual profitability. ii) Projects entailing 2.1GW capacity are being developed via the JV route, with project cost of Rs170bn and expected commissioning over FY26-27. iii) Through its subsidiaries, ~1.3GW of projects with cost of Rs11bn are expected to be commissioned in FY26 and a 120MW project (at cost of Rs9bn) is scheduled for commissioning in FY25, for the company.

* We maintain BUY on CESC; we believe the worst is factored-in, with the recent WBERC regulations: CESC’s earnings (especially SA) have been lackluster in the past few years. There has been no tariff hike in the Kolkata license area, thus leading to flattish earnings. While there has been improvement in profit for the Noida license area and Dhariwal IPP, performance of DFs has not been too enthusing. Rajasthan DFs, despite having completed 4-5 years, have not been able to see breakeven because of the Kota circle. Also, Malegaon losses have widened during 9MFY23. More recently, the WBERC has made a modification to tariff regulations (effective FY24), with 3 main implications for the CESC which are. 1) sharing on benefits increased to 1/3rd vs 25% earlier; 2) normative T&D loss levels slashed, from 14.3% to 9% (the market was expecting the typical 11-12% T&D loss); and 3) for incremental capex in Distribution/Generation, RoE would be 15.5%/14% going ahead (vs 16.5%/15.5% now), though RoE for CoD till FY23 remains unchanged. We believe if tariff remains at current levels, then there will not be much impact on profit – assuming that majority of the impact would be nullified by allowance of interest on short-term loans. As per the tariff order (Aug22), FY23 PAT admitted by the Commission is Rs7.6bn, while CESC’s actual earnings are estimated at Rs8bn, including other income. Hence, we believe that the worst is factored-in the stock price. We re-iterate BUY, with TP of Rs95/share.

* Power Grid: Since the last one year of our re-initiation, the stock has seen ~15% appreciation in its price along with ~6% dividend yield – in line with our expectations. PWGR remains a low earnings-growth (3-5%) story for the medium term, with 6/7% dividend yield. Any deviation from this thesis can occur via stronger capex on the Transmission front or significantly-higher market share in TBCB projects.

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