NTPC gains as low valuation, upbeat analyst commentary trigger buying binge

NTPC said consolidated revenue rose 19 percent YoY at Rs 44,252.92 crore. Revenue from generation and other segments also grew at a healthy pace, contributing to a decent sales growth.

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Shares of NTPC gained over 2 percent on May 22 as low valuation and upbeat analyst commentary triggered buying in the stock of the state-owned power producer.

At 2:19pm, NTPC was trading 0.72 percent up at Rs 174.50. So far today, the stock was trading with volumes of 332,671 shares as compared with its five-day average of 256,975 shares, an increase of 29.5 percent.

Elara Securities sees higher capital expenditure for the renewable energy portfolio, bolstering NTPC’s growth. The stock is trading at a historically low valuation of 0.9 times the FY25 price-to-book ratio, which seems attractive, it said. The brokerage firm has reiterated its ‘buy’ call on the stock with a target price of Rs 209 because of better visibility on regulated returns and traction on renewable energy initiatives based on 1.5 times regulated equity FY24 price-to-book.

“We believe NTPC is well positioned to achieve its target with strong project pipeline,” it said. NTPC plans to add 4,000 MW capacity on a standalone basis and 6,810 MW at the group level by FY24. It has set an ambitious target to reach 130 GW by CY32, including 60 GW of renewable energy capacity.

Even Emkay Global Financial Services has maintained its ‘buy’ rating on the stock with a target price of Rs 205.

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NTPC is expected to report a 7 percent compounded annual growth in EPS during FY23-FY25 with a return on equity of approximately 12.5 percent, said Emkay Global. The company is expected to commission about 27GW of power projects over the next three-four years. Hence, the above growth profile will continue in the medium term, the brokerage firm added. Improvement in coal plant load factor, capacity addition and renewable energy monetization are positive parameters for the company, it said.

NTPC said consolidated revenue rose 19 percent YoY at Rs 44,252.92 crore. Revenue from generation and other segments also grew at a healthy pace, contributing to a decent sales growth.

EBITDA was up 4.5 percent at Rs 11,942.40 crore. However, rise in fuel cost, employee benefit expenses, and finance cost led the EBITDA margin to contract to 26.99 percent from 30.81 percent posted a year ago. Even net profit fell 6 percent YoY to Rs 4871.55 crore.

For NTPC, core generation growth surprised in a seasonally weak quarter and also set aggressive renewable capacity addition targets over next three years, ICICI Securities highlighted. It added that from an operational perspective, gross generation and energy sold stood at 89.7 billion units (BUs) and 77.8 BUs, which were higher than our estimates of 83.9 BUs and 77.8 BUs. However, tariff came in at Rs 4.95 per unit led to rise in revenues, the brokerage firm pointed out.