Electricity is one of the most vital infrastructure inputs for the economic development of a country. There is a huge demand for power in our country on the back of rapid urbanization and industrialization. Keeping in view the rate of growth of our economy, this demand is going to increase manifold in near future. The regional energy demand is forecasted to reach 5,334mn tonne by 2014. The nuclear power demand is forecasted to reach 50.0TWh by 2014. The number of power merchant plants is all set to increase in coming years with the government inviting private players’ participation in the power sector.
We foresee the power sector as a happening sector in near future, in tune with the above rationale. Out of the many lucrative scrips in the sector, we have short listed CESC Ltd. and Power Finance Corporation Ltd. which cannot be missed out.
CESC Ltd., India's first fully integrated electrical utility, has been generating and distributing electrical power in Kolkata and Howrah since 1899. The company is fundamentally quite strong with a consistent performance QoQ. Going ahead, it is planning to invest Rs. 18,000-20,000 crore over the next 3-4yrs, on new projects in Maharashtra, Bengal, Jharkhand, Orissa and Bihar. The company has also entered into a contract with Australia-based firm Resource Generation for purchase of 37 million tonnes of coal which is the main input for power generation. The stock currently trading at Rs.413 can be bought with a stop loss of Rs.390 and a target of Rs.451.
On the other hand, Power Finance Corporation Ltd acts as a pivotal developmental financial institution in the power sector, committed to the integrated development of power and associated sectors by channeling the resources and providing financial, technological and managerial services. The company’s financials for the quarter ended June’10 reported an 18%yoy increase in net profit and a 28%yoy increase in total income. For the year quarter ended June’10, Net Profit and Total Income for the Quarter ended June’10 increased by 18% and 28% YoY respectively. The company in the coming years intends to become a complete solution provider to power companies by foraying into new power related areas like insurance service, asset acquisition advisory services and rating services. The leading technical indicators appear quite bullish on the stock. The stock is currently trading at Rs.356 and should hit the levels of Rs.435 in the coming months.
We recommend adding the sector in one’s portfolio for reaping good returns in future.
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