Buy NTPC, target price Rs 145: Motilal Oswal

Motilal Oswal has given a buy rating to NTPC with a target price of Rs 145. The share price moved down by -0.15 per cent from its previous close of Rs 97. The stock’s last traded price is Rs 96.85.

According to the brokerage, NTPC’s results highlight the impact of several one-offs, largely on the tax front. Adjusted for these one-offs, though, numbers reflect the benefit of fixed cost recoveries and strong other income. The brokerage expects fixed costs under recoveries to remain low on better coal availability. A pickup in capitalisation, along with lower fixed costs under recoveries should drive a 10 per cent earnings CAGR over FY20–23.

Investment Rationale

NTPC commercialised 5.3GW of capacities for FY20 – the highest ever in a single fiscal year – and is guiding for 5.9GW to be capitalised in FY21. Capitalisation has picked up pace and would drive a regulated equity CAGR of 12 per cent over FY20–23E and boost RoE (+120bps accretion). Furthermore, muted power demand, coupled with production ramp-up at Coal India’s mines, has led to an increase in coal stocks at power plants and improved plant availability factors. The brokerage maintains a buy rating, with a discounted cash flow based target price of Rs 145/share.

Quarterly Performance
Source: Motilal Oswal

Financials

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 25412.39 crore, up 3.89 per cent from last quarter sales of Rs 24459.70 crore and down -.31 per cent from last year's same quarter sales of Rs 25491.04 crore. The company reported net profit after tax of Rs 3113.61 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 51.02 per cent stake in the company as of March 31, 2020, while FIIs held 12.64 per cent, DIIs 33.56 per cent and public & others 2.78 per cent.