Switzerland-based brokerage UBS has turned taken an 'anti-consensus yet constructive view' on the domestic power generation equipment sector, seeing a strong and sustained upcycle ahead, driven by both thermal and renewable segments.
The brokerage said that industry revenue can reach Rs 11 lakh crore by FY2030, implying a 22 percent CAGR over FY2025 to FY2030, unlike the past thermal-led cycle.
As a result, UBS initiated coverage with a ‘buy’ rating on BHEL, Waaree Energies, Premier Energies, and Suzlon Energy. It has also reiterated its ‘Buy’ call on Thermax, raising the price target to Rs 5,100, and continues to remain positive on Triveni Turbine.
For BHEL, UBS has set a target price of Rs 340, which suggests the stock could rise about 38 percent from current levels. The brokerage set a price target of Rs 1,340 for Premier Energies, around 30 percent higher than its closing price on Monday.
The biggest upside, according to UBS, is in Waaree Energies. The firm expects the stock to rally nearly 40 percent, with a target of Rs 4,400. Meanwhile, Suzlon Energy is expected to see a smaller, but still meaningful, gain of 20 percent as UBS has set its target price at Rs 78.
According to UBS, the market may be underestimating the strength of thermal execution and the hurdles in achieving backward integration in solar module manufacturing, especially as localisation norms tighten. The space sees diverse participants, as "private sector is driving renewable additions, while the government leads thermal."
Valuations remain favourable, with existing solar players ramping up investments nearly fourfold compared to FY2025 gross block to meet rising domestic and export demand. There is a strong pipeline in thermal, wind, and industrial power, pointing to visible earnings and order-book growth in the medium term.
"We see scope for earnings and order-led value creation over the next 3-5 years, offering a favourable setup for returns, driven by scale, policy tailwinds, and technology adoption," said UBS. The brokerage's top pick order is BHEL, Thermax, and Waaree Energies.
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