Buy NTPC; target of Rs 170: Sharekhan

Sharekhan's research report on NTPC

The recent sharp 17% fall in NTPC’s stock price from its 52-week high is unwarranted given risk-averse earnings model and a healthy dividend yield of 5%. Also, NTPC’s market capitalisation ignores long-term value creation from large renewable energy (RE) expansion plans. We maintain a Buy on NTPC with an unchanged PT of Rs. 170; FY24E P/BV attractive at 0.9x. NTPC’s standalone regulated equity base would clock a 12% CAGR over FY22-24E led by robust commercialization plan of 5GW/6GW in FY23E/FY24E. This coupled with sustained high plant load factor (PLF) for thermal assets and better coal availability (captive coal production grew 27% y-o-y to 14 mt in FY22) to drive 16% CAGR in standalone PAT over FY22-24E along with decent RoE of ~14%. Strong operating cash flows (up 31% y-o-y to Rs. . 35,388 crore in FY22) and low cost debt (high credit rating) to help drive transition towards RE capacities (60GW target by FY32 or 46% of capacity versus 3% currently), which would create significant value and drive re-rating besides addressing ESG concerns for NTPC.

Outlook

Potential monetisation of NTPC Green Energy Limited through induction of strategic investor and an IPO at a later stage could unlock value from RE business.

More Info

At 12:32 hrs NTPC was quoting at Rs 138.40, up Rs 1.00, or 0.73 percent.

It has touched an intraday high of Rs 139.65 and an intraday low of Rs 137.55.

It was trading with volumes of 289,980 shares, compared to its thirty day average of 522,652 shares, a decrease of -44.52 percent.

In the previous trading session, the share closed down 2.17 percent or Rs 3.05 at Rs 137.40.

The share touched its 52-week high Rs 166.30 and 52-week low Rs 111.95 on 19 April, 2022 and 26 August, 2021, respectively.

Currently, it is trading 16.78 percent below its 52-week high and 23.63 percent above its 52-week low.

Market capitalisation stands at Rs 134,201.86 crore.

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