Buy NTPC; target of Rs 365: Sharekhan

Sharekhan's research report on NTPC

Q3FY24 adjusted PAT was up 1% y-o-y to Rs. 4,468 crore (above estimates) due to higher other income which offsets rise in fixed cost under-recoveries. Regulated equity base grew by 9% y-o-y to Rs. 82,094 crore. NTPC plans to add another 16.8 GW of thermal capacities beyond by FY26 besides under-construction thermal capacities of 10 GW. Renewable energy (RE) capacity target remains strong at 15 GW by FY26 but recent execution has been subdued with RE capacity remaining stagnant at 3.3 GW. We believe that addition of thermal power capacities would drive regulated equity base and provides earnings growth visibility. Moreover, focus on ramping up of RE portfolio and new areas of green hydrogen/battery storage would be key re-rating catalysts in the medium to long term as it would not only drive growth but also improve ESG score.

Outlook

We maintain a Buy on NTPC with a revised PT of Rs. 365. Valuation of 1.8x FY25E P/BV is reasonable given strong long-term growth prospects and stock offers a healthy dividend yield of ~3%.