NTPC shares rise 2% as Morgan Stanley sees 14% upside

Shares of NTPC gained 2 percent on March 3 with Morgan Stanley saying it sees around 14 percent upside.

The foreign brokerage firm has an overweight rating on shares of NTPC with a target price of Rs 198. At 10:16am, shares of the company were trading at Rs 173.8, up 1.9 percent, on the BSE. The stock is trading closer to its 52-week high of Rs 182.95.

Morgan Stanley sees some catalysts for the stock to rally more. These are monetisation of renewable assets in the near term, new thermal orders, lower competitive intensity in acquiring stressed assets, and commissioning of pipeline plants.

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Moneycontrol had reported on March 1 that the power ministry directed its public sector undertaking NTPC to operate and generate all its gas-based power plants to full capacity for a month, said Alok Kumar, secretary, Ministry of Power. This is considering the peak power demand is expected to hit 229 gigawatt (GW) in April.

Sharekhan by BNP Paribas sees the double-digit growth in power demand with peak demand of more than 200 GW benefitting NTPC in terms of higher thermal Plant Load Factor (PLF) and drive the increase in PLF’s incentive income. The sharp 49 percent on-year fall in discom due to power generation companies to strengthen NTPC’s balance sheet, it said.

PLF is the ratio of average power generated by the plant to the maximum power that could have been generated for a given time period. It is commonly considered as a metric to check efficiency of a plant by measuring a power plant’s capacity utilisation.

Strong commercialisation target, improving thermal PLF, given high power demand and focus on lowering fixed cost under-recoveries makes NTPC as one of the safest bets in the current volatile environment, said Sharekhan.

Strong growth outlook visibility and healthy Return on Equity of 14-15 percent along with potential value unlocking through minority stake sale of renewable energy assets make NTPC valuation attractive at 1.1 times FY25 Price to Book Value (P/BV) which is at a steep 26 percent discount to historical average P/BV multiple, the brokerage firm said, while adding that the stock offers a healthy dividend yield of 4-5 percent.

Sharekhan has maintained its ‘buy’ call on NTPC stock with an unchanged target price of Rs 200.