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Government’s renewables push to power up equipment makers

According to reports, the government’s recent and upcoming auctions of renewable energy projects may provide a boost to the stocks of Ujaas Energy, Suzlon Energy and PTC India, which are engaged in green energy production and financing.

Suzlon and PTC India are expected to be the beneficiaries of the government’s 1000 MW wind power auctions last month. The power generated will be supplied to states that do not have adequate wind resources.

Bid wins will provide more revenue visibility and capacity expansion opportunities in the coming quarters for these companies. In terms of magnitude, 1000 MW of electricity can power 10 lakh homes and represents a business opportunity for more than Rs 5,000 crore, according to analysts. On Wednesday, shares of Suzlon ended 1.41% lower while PTC India fell 1.30% and Ujaas Energy ended 1% down. Suzlon, a wind turbine supplier, could bag an order for 250 MW from Sembcorp which was one of the winners in the auction, said analysts.

“The potential exposure to new, non-windy markets for Suzlon is a positive. It could provide a new source of order inflows in the coming years,“ said Deepak Agrawala, analyst at Elara Securities.

“The technological developments on wind turbine generators and potential exit from corporate debt restructuring are still to play out, so the stock has suf ficient room for upside.“ Analysts said the company’s valuation at 16.2 times its 2017 earnings also look attractive.

The government has set a target of 12-15 GW expansion in solar energy projects by the end of this year and execution of 3 GW of these are set to take place in the next two months. Ujaas Energy will benefit from these auctions as the company is looking to bid for orders above 50 MW, analysts said.The company’s current order book stands at 50 MW.

“If the company even manages to win a 50 MW project, its execution doubles from the current level and the stock could see a considerable rise,” said Ankit Soni of Karvy Broking.

“Considering the potential project wins in the coming quarters and those being completed by the company presently, the stock and valuations are still not expensive.“

The brokerage has a target price of Rs 63 on the stock. The promoters of the company diluted their stake to raise capital last month which had led to a fall in stock price. In the past month, it fell 23%.

Another beneficiary of the renewable energy push will be PTC India. The company has been assigned to the trading entity for wind power projects auctioned by the government.

“PTC India has a new revenue line in the form of trade in renewable energy between Q4FY18 and 19 as the execution time given to bidders is 18 months,” said Agrawala of Elara.

The stock has risen 18% since the beginning of the year and trades at 9.6 times its 2017 earnings.

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