NTPC: A power hungry India makes NTPC stock a clear winner
The company’s dominant position in the thermal power space and the plan to up capacity for renewable energy manyfold in the next few years are seen benefiting the state-owned power producer, whose stock ended as the best performer on the Nifty 50 on Thursday at ₹317.10, up 3.6% from the previous close. The stock hit a lifetime high of ₹321.75 earlier in the day.
With the demand for power growing at more than 7% currently, experts anticipate the power deficit becoming regular from FY25 onwards, of which NTPC is seen as the prime beneficiary.
At nearly 74 GW including its subsidiaries and joint ventures, the company currently accounts for around 17% of the country’s installed capacity and a fourth of the power generated in FY23.
“As RE (renewable energy) power is inherently seasonal, thermal additions will be critical to provide the base capacity and for grid stability, which will continue to drive its demand,” Axis Securities said in a note, initiating coverage on the shares with a ‘buy’ rating and a target price of ₹345.The Central Electricity Authority sees an additional 47GW of coal-based energy by FY32, of which NTPC is seen getting a big chunk because of its brownfield power projects.
NTPC already has 10 GW of thermal capacity under construction and will be awarding capacity of over 11 GW over the next 12 months. It also plans to up its renewable energy capacity to 60 GW from 3.3 GW currently.Of this, around 20 GW is expected to come up in the near term as projects of more than 7 GW are currently under construction, and the company has secured tenders and bilateral tie-ups for another 10 GW of capacity.
“As RE portfolio becomes more sizeable, we believe the stock will continue to re-rate,” brokerage Jefferies said in a note on Thursday, raising the target price for the shares by 38% to ₹415.
Kotak Institutional Equities, though, finds the stock “significantly” overvalued. “We find it quite interesting that the narrative on NTPC stock also keeps changing depending on the market’s whims,” it said in a recent note to its clients. “The market was excited about its to-be-built renewable portfolio when the stock was at half the current market capitalisation and the market is excited now about its to-be-built coal-based capacity,” it said.