Brokerage Bets On This Navratna Stock For Investment, Sees 18% Return, Target Price Rs 210

ICICI Securities in its recent report on NTPC Limited maintains its buy call with a revised target price of Rs 210 per share. The brokerage sees potential gains of 18% with the given target price in 12 months. NTPC is a large-cap Maharatna PSU company under the Ministry of Power, Government of India. NTPC is India's largest power utility with an installed capacity of 70,254 MW (including JVs) and plans to become a 130 GW company by 2032.

NTPC delivered stable performance in Q2FY23 with standalone/consolidated reported PAT at Rs33.3bn / Rs34.2bn (+5.5% / -7.4% YoY) and adjusted-PAT at Rs36bn / Rs36.8bn (+8.8% / -1.3% YoY), respectively.

Stock Outlook & Return on Investments

The stock of the company today opened at Rs 174 apiece, currently trading at Rs 178.95 apiece, 3.38% from its previous close. It has a market capitalisation of Rs 1,72,309 crore. 
 
In the past 1 week, the stock jumped 5.76%. Whereas, in the past 1 and 3 months, the stock gained  12.18% and 14.44%, respectively. Over the past 1 year, the stock gained by 33.36%. In 3 and 5 years, the stock gave a positive return of 47.41% and 18.9%, respectively.

The 52-week low level is Rs 119.10 apiece, which was recorded on 20 December 2021, and the 52-week high is Rs 179.50 apiece, which was recorded on 1 November 2022, respectively.

Profits stable

In Q2FY23, on consolidated basis, revenue stood at Rs442bn (up 36.3% YoY) while EBITDA was up 21.7% YoY at Rs109bn. Other income declined 26.8% YoY to Rs5.1bn. Reported PAT was Rs34.2bn (down 7.4% YoY) while adjusted-PAT declined 1.3% YoY to Rs36.8bn. On standalone basis, revenue was at Rs410bn (+44.8% YoY) while EBITDA was up 31.8% YoY to Rs95.2bn. Reported PAT came in at Rs33.3bn (+5.5%) and adjusted-PAT grew 8.8% YoY to Rs36bn. Other income declined 15.7% YoY to Rs8bn. For H1FY23, standalone gross generation rose 16% YoY to 176BU and average tariff was Rs4.77/unit (vs Rs3.82/unit in Q2FY22). Coal PLF was at 74% (up 450bps YoY) while PAF was at 93.7% (up 835bps). Gas PLF was 507bps lower YoY at 2.6%. Regulated equity for the standalone stood at Rs749bn. NTPC took a one-time finance charge as per the scheme for restructuring the discom overdues of Rs3.33bn (total receivable amount is Rs61.08bn). This is the differential of the PV of the instalments and the total outstanding (which will be reversed in the subsequent quarters once the company starts receiving the instalments). There was an additional one-time tax impact of Rs1.9bn due to the merger of KBUNL and NPGCL.

Capacity addition target of 18GW over FY23-FY25

NTPC group's total installed capacity was at 70.3GW (up 1,150MW QoQ, 3.4GW YoY). Standalone capacity was 57.6GW. Among the upcoming coal projects, Talcher (2x 660MW) has already been awarded to BHEL. Lara (2x 800MW) is likely to be awarded by Mar'23, Sipat (1x 800MW) by Q2FY24, Singrauli (2x 800MW) by FY25 and Darlipalli (1x 800MW) by FY24 if forest clearance is issued. H1FY23 group capex was Rs166.6bn vs Rs151.4bn in H1FY22. Capital outlay for NTPC standalone in FY23 is Rs224.54bn and that for the group is Rs275bn. Group capex target for FY24 is Rs250bn-260bn and that for FY25 is >Rs200bn.

Asset monetisation

2,861MW of RE capacity has been identified for monetisation which have book value of >Rs100bn. NTPC will transfer its existing RE assets to NREL, to be housed under holdco NTPC Green Energy, which will also house other green ventures. NTPC is targeting to offload 10-20% of its shareholding in NTPC Green Energy in CY22.

Buy stock with a target price of Rs 210/share

Maintain BUY with a revised SoTP-based target price of Rs 210/sh (earlier: Rs196/sh), factoring-in the recently announced 6.1GW of additional coal capacity to be set up over the next 5-7 years (discounting the cumulative regulated equity). The stock is trading at FY24E standalone P/BV of 1.2x (P/E of 9.6x) and FY24E consolidated P/E of 8.7x.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.