In the quarter ended September 2024, NTPC’s consolidated revenue from operations and EBITDA dipped around 8 per cent each year on year to ₹44,696.3 crore and ₹11,655.2 crore respectively. After the results announcement last Thursday post-market hours,  the stock dropped 3 per cent on Friday. In fact, the shares of NTPC have corrected 11 per cent from its 52-week high of ₹443.2 recorded on September 30, 2024. However, on the back of strong tailwinds, BSE Power had a stellar run during the last 12 months, rising 80 per cent. NTPC too, in line, recorded a 72 per cent rise during the same period.

This recent correction resonates more with profit-booking, and with a mammoth capex plan of ₹7 lakh crore until FY32, NTPC has a long runway in place.

Business as usual?

Average coal prices fell 5.8 per cent from ₹3,791 per tonne last FY to ₹3,584 in Q2 FY25. This correlates with fuel costs dropping by 5.4% year on year. However, NTPC’s thermal capacities largely backed by long-term power purchase agreements (PPAs) include a pass-through mechanism, so coal price reductions are passed to customers, leading to lower realisations.

The planned outages (for operations and maintenance) during H1 FY25 also rose nominally to 6.12 per cent from 5.19 per cent during FY24, which resulted in a 2 per cent year-on-year drop in power generation to 88.5 billion units in Q2 FY25.

Both the price and volume drop had a causal relationship with the above-mentioned dip in revenue.

The Plant Load Factor (PLF), the utilisation metric, of NTPC’s coal-based plants, which comprise 82 per cent of its capacity, fell to 72.3 per cent in Q2 FY25 from 75.8 per cent in Q2 FY24 due to demand rather than efficiency issues. With growing renewable participation, a slight year-on-year PLF decline is expected, supporting reduced fuel costs and a more profitable mix, going forward.

Coal production from captive mines, in line with the target to bring it up to 25 per cent of the company’s captive requirements by FY30, rose 62 per cent to 9.03 million tonnes (mt) in Q2 FY25. Continued capex on these mines is expected to reduce coal imports and shield against price volatility and unfavourable fuel cost mix.

How the future looks

NTPC’s consolidated capex for FY25 is set at ₹27,982 crore, with ₹17,470 crore spent in H1 FY25 – 31 per cent higher than H1 FY24. Its total installed capacity grew 385 MW in Q2, driven entirely by renewables. Capacity under construction add up to 21 GW across energy segments and around 13.6-GW new projects are planned to be added to the development pipeline in FY25, from the thermal segment alone.

The management anticipates no land shortages, no hiccups in securing PPAs for upcoming facilities, and smooth transmission connections for projects slated until FY26.

Also, value unlocking is underway through the IPO of NTPC Green Energy (NGEL) - expected to be launched within Q3 FY25. Post-IPO, all the renewable energy projects, including green hydrogen, will be housed under NGEL.

The shares of NTPC, at market close on Friday, were trading at a one-year forward PE of 17.5 times, against a five-year average of 9.4 and three-year average of 10.8, which does not appear inflated and is cheapercompared with its close peers - Tata Power (31.2 times) and JSW Energy (40.1 times).

Strong execution track record and the ongoing capex spree on thermal and green energy fronts, both crucial for India’s transition goals, sets NTPC apart from its peers and sets it up for strength.

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