Buy NTPC; target of Rs 122: Emkay Global Financial

Emkay Global Financial's report on NTPC

Availability (PAF) improved by 470bps yoy across coal-based plants to 95.8% in Q1FY21 (highest in past 4 years) due to low generation amid subdued demand and high coal availability from better supply by CIL. Q1 saw nil under-recovery vs. Rs1.1bn last year. NTPC reported a strong quarter despite Covid-19-related disruptions. EBITDA grew 11.5% to Rs72bn, driven by a fall in fuel costs. NTPC recognized a one-off discount of Rs8.0bn to the discoms. Adjusting the discount, PAT rose 20.1% yoy to Rs31.4bn. NTPC added 660MW Khargone capacity to its commercial capacity and targets to add ~5GW capacity p.a. over FY21/22/23E. We expect NTPC’s standalone regulated equity to increase at a CAGR of 10.2% over FY20-FY23E to Rs782bn.

Outlook

We maintain our Buy rating on NTPC with an unchanged TP of Rs122, backed by its riskaverse regulatory business model, historic low valuations of 0.7x FY22E P/BV and the dividend yield of ~5%-6%. NTPC is also considering a share buyback in FY21.