Buy NTPC; target of Rs 495: ICICI Securities

ICICI Securities research report on NTPC

NTPC Green Energy Limited (NGEL), a 100% subsidiary of NTPC, is looking to debut on exchanges as the company files its DRHP. In this note, we analyse NGEL’s business, look at its valuation metrics and evaluate key concerns. The company has an operational capacity of 3.2GW, 12GW of contracted under-construction renewable energy (RE) projects and future development pipeline at 11GW. NGEL is not only looking to set up utility-scale RE projects, but also tie up with corporates and PSUs for their captive RE requirements. We expect the return ratios for captive to be higher than utility-scale projects. NTPC targets 60GW of RE capacity by FY32.

Outlook

We estimate revenue of INR 117bn, EBITDA of INR 95–100bn for its portfolio. EV to EBITDA remains the best valuation metric to analyse NGEL’s RE portfolio. Retain BUY and TP of INR 495 on NTPC.