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Last Updated : Feb 10, 2020 12:28 PM IST | Source: Moneycontrol.com

NTPC falls 2% despite healthy Q3 show; brokerages remain positive

The stock fell despite a healthy set of Q3 numbers. Most brokerages see the fall in stock as a momentary development and find the stock attractive for the long-term.

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Shares of NTPC declined over 2 percent intraday on February 10 even as the company, on February 7, reported nearly 23 percent jump in consolidated net profit at Rs 3,197.93 crore in December quarter of FY20, mainly due to higher revenues.

The company had posted consolidated net profit of Rs 2,608.18 crore in the corresponding quarter of the previous financial year.

According to the statement, the total income of the company rose to Rs 25,953.09 crore during the quarter under review from Rs 25,677.09 crore a year ago.

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The stock fell despite a healthy set of Q3 numbers. Most brokerages see the fall in stock as a momentary development and find the stock attractive for the long-term.

Citi has a buy call

Global financial firm Citi has a buy call on NTPC with a target of Rs 142 and said the company reported strong Q3 numbers on improved availability of plants.

As per the financial firm, the management targets to end FY20 with under-recovery of under Rs 200 crore.

"The company remains our top pick in electric utilities and we see an earning per share (EPS) growth of 12 percent over FY19-22 and an average return on equity (RoE) of 10-12 percent," Citi said.

Motilal Oswal, too, gives a buy

Domestic brokerage firm Motilal Oswal Financial Services, too, has a buy call on the stock with a target price of Rs 154 and said that NTPC’s results highlight the benefit of fixed-cost recoveries and higher surcharge income.

The brokerage expects recoveries to continue in the fourth quarter with improving availability at NTPC’s plants.

"We expect capitalization to pick up, driving regulated equity CAGR of 14 percent over FY19-21. Capitalization will outpace capex and boost RoE," Motilal Oswal said.

"Over the near-term though, risks related to government divestment and the uncertainty on value accretion over the potential acquisition of NEEPCO and THDC could be an overhang on the stock," it added.

As per the management of NTPC, transaction advisors have been appointed for NTPC’s potential acquisition of NEEPCO and THDC. CCEA approval has been received.

Kotak Institutional Equities maintains buy call

As per the brokerage, NTPC reported a relatively cleaner result. Capacity addition continues with 1.4 GW commercialised during the quarter, and 2.2 GW in the nine months of FY20. Another 12.7 GW of capacities under construction or commissioned will help sustain near-term growth.

"We maintain buy rating with a fair value of Rs 160 share, noting inexpensive valuations of 0.8 times P/B and 7 times P/E on March 2022 earnings," Kotak said.

Kotak is hopeful that improved operational performance, regulatory clarity and lowered government ownership would likely shift focus to underlying growth profile once again for the company.

JM Financial maintains buy call

JM Financial maintained buy recommendation on NTPC with a target price of Rs 160, given inexpensive valuations and steady growth.

"NTPC’s capacity additions plans remain strong with 5.9GW/5.6GW additions (at group level) targeted for FY20/21. With a 5GW of annual capacity addition, improving coal stocks/PAFs and c) low base of FY19, we believe NTPC can deliver around 13 percent EPS CAGR over FY19-22 while the stock trades at 0.9 times FY21 BV," said the brokerages.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Feb 10, 2020 12:26 pm
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