NTPC’s risk averse regulated business model provides earnings visibility (expect a 19% PAT CAGR over FY2021E-FY2023E) as robust commercialisation target (5-6 GW annually) would drive strong growth in regulated equity base. We expect gradual re-rating led by improving operational performance (PAF at 90% plus and higher PLF for coal-based power plants), 15% CAGR guidance over FY21-23 in regulated equity, and better mix of renewable energy to allay concern of ESG. Management is confident to reduce receivable to Rs. 16,000 crore by Q4FY2021 (versus Rs. 19,164 crore in Q2FY2021) as discoms are expected to clear dues of power generation companies under power sector relief package.
OutlookWe maintain our Buy rating on NTPC with a revised PT of Rs. 140, as valuation remains attractive at 0.8x is FY2023E P/BV (46% discount to historical multiple) despite improved earnings visibility and dividend yield of 6-7%. Buyback price of Rs. 115 (close to FY2020 book value) would provide support to the stock price.
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