1:5 & 1:3 Bonuses, 2-5% Dividend Yield: 2 Maharatna PSU Energy Stocks NTPC, Power Grid Recommended To BUY

High voltage PSU stocks, Power Grid Corporation and NTPC are recommended to buy as CERC retains most of the norms specified in the draft tariff regulations in letter and spirit, ensuring the stability of policy, as per brokerage BoB Capital Markets. In its rationale for recommendations, the brokerage pointed out that PSU utilities offer valuation comfort.

In its latest research note, analysts at BOB Capitals highlighted that the final tariff norms released by
the Central Electricity Regulatory Commission (CERC) for FY25-FY29 have retained most of the norms set in the draft policy released earlier. It ensures the stability of existing power assets by keeping their regulated returns unchanged.

Some of the key outcomes were that CERC maintained tariff guidelines to 15.5% ROE for thermal generation stations over FY25-FY29, which is in line with current norms (FY19-FY24). Further, CERC raised the attractiveness of hydro-based power by hiking ROE by 50bps to 17% for storage-based hydro plants as well as pumped storage hydro plants (PSHP).

BOBCaps' note added, "We believe this is aimed at storage capacity as PSHP is a viable solution to make renewable power available round the clock (RTC). On the transmission side, CERC has marginally reduced regulated ROE by 50bps to 15%."

On the impact on power stocks, BOBCaps expect the new proposals to have little impact on our coverage universe as the regulated ROE on NTPC and TPW's generating assets remain the same, whereas PWGR could see a marginally negative impact as the bulk of its new capex is earmarked for tariff-based competitive bidding (TBCB).

Also, BOBCaps believes that the proposals are incrementally positive for NTPC as it plans to add ~8GW
of PSHP over the next 5-7 years due to the better ROE profile of PSHPs. The norms are positive for hydropower companies like NHPC (Not Rated) and SJVN (Not Rated).

Accordingly, NTPC and Power Grid are top picks of BOBCaps.

On the valuation of the two Maharatna PSUs, BOBCaps note said, "Given their stature and track records, we believe that NTPC and PWGR should enjoy valuations closer to their private sector peers, which trade at a ~50% premium to the price to book multiple (on a TTM basis). The valuation comfort in PSU stocks leads us to retain our BUY ratings on NTPC (TP Rs 370) trading at a P/B of 1.8x of the Dec'25 book and PWGR (TP Rs 320), trading at a P/B of 2.2x of the Dec'25 book - our top picks in the utilities space."

NTPC: BUY For Target Price Of Rs 370

There is a potential upside of 14% in NTPC shares from the current price level. On March 21, NTPC shares were at Rs 325 apiece, up by 3.6% with a market cap of Rs 3,15,141.65 crore. In a year, NTPC shares have gained by over 86% on BSE so far.

Power Grid: BUY For Target Price Of Rs 320

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.