Buy NTPC; target of Rs 425: Sharekhan

Sharekhan's research report on NTPC

NTPC plans to add significant thermal power capacities is coming at right timing of peak power cycle. Core thermal power business earns a regulated RoE and a higher capex intensity would drive earnings growth and offer cash flow visibility. NTPC’s RE expansion plan of 20GW/60GW by FY27E/FY32E would mean meaningful EBITDA contribution apart from improving ESG score. Power PSUs’ valuations are at a steep discount of 35-40% when compared to private power companies. We expect this gap for NTPC (discount of 45% versus private listed companies) to narrow down, given the favourable dynamics for its core thermal power business supported by rising peak power deficit, high growth for RE and a likely improvement in ESG score.

Outlook

We maintain a Buy on NTPC with a revised PT of Rs. 425 given strong earnings growth visibility, reasonable valuation of 2x FY26E P/BV and healthy dividend yield of ~3%.

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