The International Energy Agency (IEA) has projected that Power demand in the country is expected to grow at an annual rate of 6.5% between 2022 and 2024 backed by rising consumption from residential and industrial segments. So, let’s talk about the 2 stocks which are likely to be highly benefited from this increase in power demand in this article as we move ahead.
2 Stocks to Watch:
- As power consumption is increasing the power demand will also increase, and it will be profitable basically for these two companies – IEX (Indian Energy Exchange) and Power Grid.
- The production of power also has to be increased but increasing the production of green/clean energy in the short run is not possible, the next best alternative is thermal power for which the material and everything is available.
- It is not easy to increase production as the cost of input (coal) is rising with rising interest rates the requirement for working capital is increasing, and it will be challenging. It may possible that the top line will increase but the bottom line will suffer and it might also be possible that the margin may not improve much. Things will be under pressure, for the same reason traditional power companies will not get benefited much.
- There might be a positive impact on green/renewable energy stocks but they are also facing some trouble because the speed by which renewable energy should increase is not increasing. As we have seen in the report on green energy the growth is not as expected.
Why watch these two stocks?
- The business of these two companies is related to volume. Transmission is the main business of the power grid, more than 90% of transmission in India is done by Power Grid.
- An increase in volume will benefit the company, revenue will increase and profitability will increase more because of the operating leverage. In Indian energy exchange also it’s all about the volume.
What should Investors do?
In the coming years, the consumption of power will increase, and the kind of focus we are having shifting from fossil fuel to clean the fuel so these two companies will get benefited from this. The Investor can consider these stocks with full discipline and have a staggered manner of investing.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.