Buy NTPC; target of Rs 200: Sharekhan

Sharekhan's research report on NTPC

Double-digit growth in power demand with peak demand of >200GW would benefit NTPC in terms of higher thermal PLF and drive the increase in PLF’s incentive income. The sharp 49% y-o-y fall in discom due to power genos to strengthen NTPC’s balance sheet. The recent consolidation of RE assets and subsidiaries into NTPC Green Energy is a step ahead to monetize 10-20% minority stake (expected by March 2023) in NGEL. BV of RE assets at >Rs. 10,000 crore and monetisation could unlock the value for NTPC. Risk average business model (regulated ROE) and strong commercialisation guidance of 18GW over FY23E-25E provides earnings growth visibility and makes NTPC one of the safest bets in the current volatile market environment.

Outlook

We maintain Buy on NTPC with an unchanged PT of Rs. 200 as valuation of 1.1x FY25E P/BV is at a steep discount of 26% to historical average P/BV despite expectation of earnings growth visibility and healthy RoE of 14-15%.