Buy NTPC; target of Rs 200: Sharekhan

Sharekhan's research report on NTPC

Q2FY23 adjusted PAT grew by 9% y-o-y to Rs. 3,595 crore (2% above our estimate) supported by 10% y-o-y rise in regulated equity base partially offset by higher interest cost and tax rate. Reported PAT was up by 5.5% y-o-y to Rs. 3,331 crore and had impact of several one-offs like Rs. 333 crore/Rs. 190 crore for one-time financial charge/tax impact of merger. Management guided for commercialisation of 18 GW of capacities over FY23E-25E, which would drive growth in regulated equity base and provides earnings growth visibility. NTPC plans to monetise up to a 20% stake in its subsidiary NTPC Green Energy by Q3/Q4 of FY23. Current RE assets are at 2.8 GW with book value of Rs. 10,000 crore and NTPC Green Energy will include all RE assets - Renewables, Green Hydrogen, Battery, Storage. Monetisation could unlock value for NTPC and pave for high dividend payouts.

Outlook

We maintain a Buy on NTPC with a revised PT of Rs. 200, as it is attractively valued at 1.1x its FY24E P/BV despite strong earnings visibility, focus to ramp-up RE portfolio, decent RoE of 14% and dividend yield of ~4%.