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Last Updated : Jan 24, 2020 09:19 PM IST | Source:

This Sensex stock has been hammered 16% in FY20; brokerages now see a 39% upside

Data from brokerage firms shows that the company’s average PAF improved to 89.7 percent in Q3FY20 from 84.2 percent in Q3FY19.

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Shares of NTPC closed higher by a percent on BSE on January 24, extending the gains into the second successive session.

But the stock has had a rough run in the recent past.


As of January 23 close, the stock has slipped 16 percent in the financial year 2019-20 against a 7 percent rise in the benchmark Sensex during the same period.

Subdued coal supply and macroeconomic headwinds were the main reasons for the stock’s poor performance.

NTPC Chart

However, brokerages now see a change and expect the stock to give healthy returns going forward.

Most brokerages have a positive outlook on the stock and they say that in the past few months, recovery in availability factors at plants along with commissioning and commercialisation of new capacities has lent visibility to NTPC, improving core earnings outlook.

Domestic brokerage firm Motilal Oswal Financial Services expects a 39 percent return from the stock. It has set a target price of Rs 158 for NTPC.

"Nearly 5GW of capitalization for FY20 appears to be on track given the recent commissioning/commercialization. NTPC’s plant availability has also improved. We believe fuel supply and availability at these plants can be ramped up if operational issues at mines do not persist," said Motilal Oswal.

The brokerage added that the benefit of the FY20-24 tariff regulations (GCV and O&M) is being reflected in the underlying numbers and it expects capitalisation to pick up pace and drive regulated equity CAGR of 16 percent over FY19- 22E.

"Capitalization should outpace CAPEX and boost return on equity (RoE)," Motilal Oswal said.

The estimates of Motilal Oswal shows NTPC may see a 9.6 percent year-on-year (YoY) jump in net sales for FY20 to the tune of Rs 99,356.2 crore. EBITDA margin can be at 30.6 percent while adjusted PAT may jump 13.4 percent YoY to Rs 13,000.5 crore


NTPC’s plant availability factor (PAF) increased in December 2019 to 91.4 percent from 87.9 percent in the year-ago period, primarily on improved coal supply and high inventory across stations.

Data from brokerage firms show the company’s average PAF improved to 89.7 percent in Q3FY20 from 84.2 percent in Q3FY19.

The improvement in PAF was largely attributed to better coal production at Coal India mines in Q3FY20 (up 41.7 percent QoQ) after the withdrawal of monsoon.

Brokerage firm Emkay Global points out the improvement in PAF and lower under-recovery are likely to increase NTPC’s FY20E PAT.

Emkay Research in a report on January 6 said it expect FY20E under-recovery to come down to Rs 150-200 crore from the previous expectations of Rs 350-400 crore.

"We have marginally raised our FY20 and FY21E earnings per share (EPS) by 1.7 percent and 1.2 percent, respectively. We continue to maintain our positive view and overweight stance on the stock in Emkay Alpha Portfolio, mainly due to attractive valuations of 1 time FY21E P/B," Emkay said.

Emkay has a buy recommendation on the stock with a target price of Rs 146, an upside of nearly 29 percent against the stock's closing price of Rs 113.60 on January 23.

Meanwhile, the power ministry appointed Ashish Upadhyaya as a government nominee director on NTPC's board, the company said on January 23.

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First Published on Jan 24, 2020 01:19 pm
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