Buy NTPC; target of Rs 260: Sharekhan

Sharekhan's research report on NTPC

Q1FY24 adjusted PAT grew by 12% y-o-y to Rs. 3,794 crore (below estimates) as regulated equity base increased 12% y-o-y. Earnings missed mark mainly due to lower other income. NTPC aims to expand its capacity to 130 GW (including a 60 GW RE capacity) by 2032 versus 73 GW currently. For the next three years, it has guided for a 10 GW/16 GW of conventional/RE capacity addition. This would drive up consolidated regulated equity base strongly to Rs. 1.25 lakh crore by FY26 versus Rs. 94,180 crore in FY23. NTPC is considering an IPO for its subsidiary NTPC Green. It has also approved to hiving off- the coal business into a separate subsidiary. Review of regulated tariffs from April 2024 would be key monitorable for NTPC.

Outlook

We maintain a Buy on NTPC with a revised PT of Rs. 260 (rollover of valuation to FY25 earnings estimate). Valuation of 1.4x FY25E P/BV is attractive given strong long-term growth prospects and stock offers healthy dividend yield of ~3%. Focus on ramping up RE portfolio and new areas of green hydrogen/battery storage would be key re-rating catalyst as it would not only drive growth but also improve ESG score.