NTPC - Powering The Green Transition: ICICI Direct

ICICI Direct Report

Key Investment Thesis:

Base business to grow and outperform other players in the medium term:

NTPC Ltd. has been the only company which has added coal-based capacities over last five years and reached an installed base of 73000 mega watt on a consolidated basis.

Going ahead, NTPC is having 9300 mw of coal-based plants under construction which will be commissioned by FY25-26. This we believe will lead to 11% generation growth supported by strong plant load factors' (averaging above national level PLF’s) on thermal business and will help regulated equity growth at a compound annual growth rate of 9% from Rs 77,628 crore in FY23 to Rs 99,000 crore by FY26E.

Strong focus and execution across green energy spectrum to help diversify from the grey business:

With an aggressive approach to expanding renewable energy, including green hydrogen, NTPC aims for nearly 45-50% of its capacity to come from non-fossil fuels by 2030, with the medium-term target of 60 giga watt of renewable capacity by 2032.

Currently, the company has 3300 mw of installed renewable capacity and 5900 mw of projects under construction and ~11000 mw of projects in the pipeline. The management is fairly confident of reaching 20000 mw of renewable capacity by FY26E.

Also NTPC is striving hard to diversify into areas like green hydrogen, Nuclear power (joint venture with Nuclear Power Corporation of India Ltd., C&I, etc.

Rating and Target Price

NTPC has set out an aggressive renewable capacity addition plan to the tune of 16000 mw over FY24-FY26, which will scale up the green portfolio of the company and lead to rerating of the stock.

Per year addition of 4000-5000 mw of renewable capacity and strong growth in regulated equity in the conventional thermal portfolio We estimate Ebitda and profit after tax to grow at 16.1%, and 16% CAGR respectively over FY23- 25E.

We maintain our 'Buy' rating on NTPC. We value the stock at Rs 300 per share (based on 1.8 times FY25 book value).

About the company:

NTPC is India’s largest power generation company with a total installed capacity of ~73000 mw at the group level as of FY23.

NTPC has 17% of total installed capacity in India with 24% generation share.

The company’s vision is to become a 130 giga watt plus company by 2032 of which 60 gw would be contributed by renewable energy.

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