Buy NTPC; target of Rs 192: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal is bullish on NTPC and has recommended buy rating on the stock with a target of Rs 192 in its January 31, 2013 research report.
 
“FY13 marks the beginning of a high growth era for NTPC, with highest ever capacity addition target of 4.2GW (2.7GW achieved), coal-based generation growth of ~8% in YTDFY13 (v/s 2% CAGR over FY10-12) and commercialization of 3.8GW in YTDFY13, higher than the total of 1.5GW in FY11 and 1.2GW in FY12. Over FY13-16, we expect NTPC to add 13GW of capacity - an average of 3.3GW/year v/s historic average of 1.5-2GW/year. Higher commercialization coupled with better operating rates would be the key driver of earnings growth. Also, there is visibility on 13th Plan and 4.9GW of capacity already under construction, while ~10GW is under award. NTPC is thus better placed than other developers - both on the operational and the financial front.”
 
“NTPC aims to achieve plant availability factor (PAF) of 90% for its operating capacity under the 12th Plan, with minimal imports of 20-22m tons, owing to contribution from captive mines. Production from its first captive mines at Pakri Barwadih is set to commence in FY14, with production target of 3mtpa. This along with other captive mines would be scaled up to ~37mtpa by FY17. We note that ~30GW of NTPC's capacity is within ~400km of its five mines, which provides flexibility on fuel supply chain management. NTPC has in-principle approval from the Minstry of Coal (MoC) for additional blocks to cater to ~8.5GW of capacity. We expect NTPC to deliver earnings CAGR of 19% over FY13-15, backed by capacity addition and generation growth. Lower generation growth had impacted earnings growth over FY10-12, which is unlikely going forward, with improving cash flows of distribution companies (DISCOMs), lower gas-based generation driving offtake from coal projects, etc. Also, higher capitalization and relatively low capex intensity would bring down CWIP, leading to a 240bp improvement in reported RoE. This will also improve FCFE for NTPC from INR3b in FY13 to INR65b in FY15.”
 
“NTPC is quoting at historic lows on the back of 25% underperformance to benchmark indices over the past 12 months. Strong visibility on business/earnings growth, secure business model and low valuations are key triggers for re-rating. We expect NTPC to report an EPS of INR13.6 for FY14 and INR15.5 for FY15. The stock trades at PER of 10x and P/B of 1.4x on FY15 basis. Buy,” says Motilal Oswal research report.

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