Nuvama Institutional Equities Keeps NTPC as Top Pick, Raises Target Price to ₹413

Nuvama Institutional Equities has maintained NTPC Limited as its premier choice within the power utilities sector, citing a combination of resilient earnings, healthy profitability metrics, and ambitious expansion projects. The brokerage anticipates NTPC will achieve a 6% compound annual growth rate (CAGR) in earnings per share (EPS) between FY25 and FY27. This growth is underpinned by a consistent core return on equity (RoE) of approximately 17% and a substantial capital expenditure (capex) pipeline of ₹2.2 trillion, which will support the addition of about 22GW of capacity, split evenly between thermal/hydro and renewable energy projects.

Despite its strong fundamentals, NTPC's stock is trading at what Nuvama views as an attractive valuation of 1.5 times its estimated FY27 price-to-book value (P/BV). Based on its sum-of-the-parts (SOTP) valuation, Nuvama has increased its target price for the stock to ₹413, up from ₹401 previously.

For the September quarter of FY26, NTPC reported a standalone adjusted profit after tax (PAT) increase of 7.5% year-on-year, reaching about ₹4,500 crore. This growth was primarily driven by a significant 66% surge in other income and reduced interest expenses. However, operational performance saw a dip in plant load factor (PLF) to 66% from 72.3% a year ago due to weak power demand, causing the core RoE to decline to 14.4% from 15.8%.

On a consolidated basis, profit remained flat year-on-year at ₹5,230 crore. NTPC's expansion plans are progressing well, with 33GW of capacity under construction. The company has revised its commissioning target for FY26 to 9.2GW and plans around 10.5GW for FY27. NTPC is also diversifying into nuclear power and energy storage solutions, including a 5,000MWh battery energy storage system (BESS) project. The company declared an interim dividend of ₹2.75 per share.

Impact: This news is highly positive for NTPC and the Indian power sector, indicating strong investor confidence and potential for significant growth. The raised target price suggests upside potential for the stock, while the expansion plans highlight the company's role in meeting India's energy demands. The focus on renewables and newer technologies like nuclear and storage aligns with future energy trends, which is beneficial for the sector. This can lead to increased investor interest in NTPC and potentially other power sector stocks. Impact Rating: 8/10

Difficult terms: - EPS (Earnings Per Share): The portion of a company's profit allocated to each outstanding share of common stock. - CAGR (Compound Annual Growth Rate): The mean annual growth rate of an investment over a specified period of time longer than one year. - RoE (Return on Equity): A measure of profitability that calculates how much profit a company generates with the money shareholders have invested. - P/BV (Price-to-Book Value): A valuation ratio that compares a company's market capitalization to its book value. It indicates how much investors are willing to pay for each rupee of a company's net assets. - SOTP (Sum-of-the-Parts): A valuation method where different business segments of a company are valued separately and then added together. - PLF (Plant Load Factor): A measure of the average output of a power plant in relation to its maximum capacity over a given period. - PAT (Profit After Tax): The profit a company has earned after deducting all expenses, including taxes. - SA book: Likely refers to the book value of the regulated assets of NTPC. - CMP (Current Market Price): The current price at which a security is trading on an exchange. - MoU (Memorandum of Understanding): A formal agreement or contract between two or more parties. - BESS (Battery Energy Storage System): Systems that store energy using batteries and release it when needed. - VGF (Viability Gap Funding): Financial support provided by the government to make infrastructure projects financially viable.