Power generation grew 9.2% YoY in February 2016 (5.5% YoY adjusting for one extra day in February 2016) against capacity addition of 10.2% over the same period. Higher capacity addition vs. generation growth pushed overall Plant Load Factor (PLF) down by 228bps YoY (from 53.4% in February 2015 to 51.1% in February 2016).

ICICI Securities said, ''Growth in capacity addition has outstripped increase in demand, resulting in stress on plant utilisations. Stagnant demand growth means SEBs have not scaled up power procurement yet, and incremental industrial demand is yet to come through.''

Implementation of UDAY is under progress, and we expect demand growth to pick up once liquidity is infused in SEBs. ''We believe that unless power demand picks up meaningfully, upcoming power generation capacity (both conventional and renewable) will further depress plant utilisations,'' it noted.

''Coal availability across plants has improved significantly to 36mnte inventory (24 days of plant consumption) as of February 2016. With 34% of its total capacity being tied-up in merchant contracts, JSWEL is highly sensitive to power demand and short term power rates. On gencos' side, we prefer CESC and PTC India as their balance sheets are strong enough to survive prolonged period of demand weakness and are levered to demand revival,'' the broker added.

ICICI Securities has selected NTPC, Power Grid Corporation, CESC, PTC India, Reliance Power, Adani Power, Tata Power and JSW Energy as stock views. It has provided following trading strategies for these 8 stocks.

1. NTPC - Buy

''We maintain our BUY rating on NTPC with a price target of Rs 150/share, based on a P/E of 12x FY17E EPS. Following are the key risks to our call: i) delay in capitalisation of assets, leading to lower capital efficiency; ii) lower-thanexpected power demand, resulting in lower plant utilisations, hence lower incentive income; and iii) states declining offtake of bundled solar power.''

2. Power Grid Corporation (PGCIL) - BUY

''We maintain our BUY rating on the stock with a target price of Rs 192/share based on a P/E of 14x FY17E EPS. Following are the key risks to our call: i) slower-than-expected pace of capex and capitalisation, and ii) equity dilution to fund the capital expenditure.''

3. CESC - Buy

''We maintain our BUY rating on the stock with a SoTP-based target price of Rs 786/share. Following are the key risks to our call: i) non pass-through of additional levy on coal block at the Kolkata discom, ii) delay in locking PPAs for the remaining capacity at Chandrapur plant, iii) delayed turnaround in the company’s retail operations, and iv) investment in non-related businesses.''

4. PTC India - Buy

''We maintain our BUY rating on the stock with a target price of Rs 101/share. Following are the key downside risks to our call: i) contractual obligations as the PPA quantum is higher than for PSAs, ii) regulators not allowing traders to participate in case-1 bidding, iii) delay in realisation of dues from SEBs, and iv) deployment of cash in long-gestation / low-RoE projects.''

5. Reliance Power - Sell

''We maintain our SELL rating on the stock with a target price of Rs40/share. Following are the key upside risks to our call: i) recovery of Samalkot project cost by transferring project to Bangladesh gas-fired power plant, and ii) tariff revision for Sasan UMPP resulting in higher-than-expected returns.

6. Adani Power - Sell

''We maintain our SELL rating on the stock with a target price of Rs 18/share. Following are the key upside risks to our call: i) speedy judgment on bailout from unviable PPAs, ii) further equity dilution at attractive prices boosting financials, and iii) higher plant utilisation.''

7. Tata Power - Add

''We maintain our ADD rating on the stock with a target price of Rs 66/share based on SoTP. Following are the key risks to our call: i) prolonged litigation for bailout of Mundra, and ii) deal for sale of coal mines not going through at agreed valuations.''

8. JSW Energy - Add

''We maintain our ADD rating on the stock with a SoTP-based target price of Rs 80/share. Following are the key risks to our call: i) acquisition of assets at expensive valuations, ii) weaker-than-expected power demand, particularly in South India, leading to fall in spot tariffs, and iii) increase in coal cost.''

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