Target: ₹200
CMP: ₹172.55
Double-digit growth in power demand with peak demand of over 200GW would benefit NTPC in terms of higher thermal PLF and drive the increase in PLF’s incentive income. The sharp 49 per cent y-o-y fall in discom due to power genos to strengthen NTPC’s balance sheet.
The recent consolidation of RE assets and subsidiaries into NTPC Green Energy is a step ahead to monetise 10-20 per cent minority stake (expected by March 2023) in NGEL. Book value of RE assets at over ₹10,000 crore and monetisation could unlock the value for NTPC.
Risk average business model (regulated ROE) and strong commercialisation guidance of 18GW over FY23E-25 provides earnings growth visibility and makes NTPC one of the safest bets in the current volatile market environment.
We maintain Buy on NTPC with an unchanged PT of ₹200 as valuation of 1.1x FY25E P/BV is at a steep discount of 26 percent to historical average P/BV despite expectation of earnings growth visibility and healthy RoE of 14-15 per cent. NTPC’s risk-averse regulated business model provides earnings growth visibility/RoE improvement and RE expansion would drive gradual re-rating of the stock as it would allay concerns on the ESG front.