Jefferies positive on utilities after CERC releases tariff norms for FY25-29; lists 3 top buys

Stock market news: Utility stocks were in focus on Friday, January 5, a day after the Central Electricity Regulatory Commission (CERC) issued the FY25–29 tariff draft regulations, wherein the regulated RoE, or return on equity, for thermal has been maintained at 15.5 per cent.
 
Last seen, the S&P BSE Utilities index was trading nearly a per cent higher at 5,045.85 levels.
 
Global brokerage Jefferies, after the release of the tariff norms, has maintained its bullish stance on the sector, which had a stellar run in December 2023.
 
The brokerage highlighted that the initial read of the draft regulation suggests that generation incentives/operations, and maintenance (O&M) have seen a positive tweak.
 
For transmission, the regulated RoE is unchanged for projects commissioned before April 1, 2024, while for projects commissioned after that, the RoE has been slashed by 50 basis points to 15 per cent, Jefferies notes further.
 
Among individual names, the global brokerage specified that for FY24–26, NTPC's earnings per share (EPS) could see a 1-3 per cent upside risk, while in the case of Power Grid, it will be a 1-2 per cent downside risk.
 
NTPC, JSW Energy, and Power Grid Corporation of India are the brokerage's top picks.
 
Jefferies rating and target on power companies