NTPC surges over 4% on heavy volumes; stock nears 5-year high

With strong focus on alternate energy spectrum, analysts at ICICI Securities believe NTPC may be able to break the underperformance of the last decade

Shares of NTPC moved higher by 4.5 per cent, hitting a nearly five-year high of Rs 180.85 on the BSE in Tuesday’s intra-day trade, lifted by heavy volumes. Currently, it is quoting at its highest level since December 2017. The stock had hit a record high of Rs 243 on January 15, 2008, data shows.

At 12:50 PM, NTPC was trading 4 per cent higher at Rs 179.35, and was the top gainer among the Sensex stocks. In comparison, the S&P BSE Sensex was up 0.55 per cent. The average trading volumes on the counter more-than-doubled today with a combined 28.62 million shares having changed hands on the NSE and BSE.

NTPC is India's largest power generation company with a total installed capacity of 69134 MW at the group level. NTPC has 17 per cent of total installed capacity in India with 24 per cent generation share. The company's vision is to become a 130 GW+ company by 2032, of which 60 GW would be contributed by renewable energy.

"Many power sector reforms are being introduced by the Government to bring efficiency, promote de-carbonization and ensure (24X7) reliable and affordable power supply. As the largest generator of the country, the Company carries the responsibility of providing adequate power to meet the grid requirement. This provides enough opportunities for multifold growth," NTPC had said in its FY22 annual report.

Considering the changes happening across the globe, while giving utmost thrust for adding renewable capacity, need has been felt for adding some coal-based capacity as it will provide resilience to the sector for meeting the increasing demand. Accordingly, the Company is considering a few expansion projects at the existing pit-head plant locations. In this direction, the company have already finalized the tender for (2X660 MW) capacity at Talcher (TTPS) as a replacement project, NTPC said.

With a strong focus on alternate energy spectrum, analysts at ICICI Securities believe NTPC may be able to break the underperformance of the last decade, and witness a re-rating coupled with monetisation of the renewable energy arm in FY23E.

"NTPC has 2000 MW commercialised renewable capacity while ~5000 MW is under construction. Capacity addition to be around 13 GW in FY24-25. The company expects to spend around 40 per cent of total capex planned for FY23, FY24 on renewable projects are key triggers for future price performance," the brokerage firm said in its result update report.

Management plans to dilute a 10-20 per cent stake in its renewable business portfolio of 2.9GW by Q4FY23, which will enhance the value proposition for stakeholders, said those at HDFC Securities. The brokerage firm maintains 'BUY' rating on the stock with a target price of Rs 192/share (vs Rs 185 earlier), assigning a 1.3x BV to its regulated equity and a 1.1x BV to its equity investment in 12GW of new solar capacities.