NTPC Q3 Review — Valuations Inexpensive But Execution To Watch Out For, Says Motilal Oswal, Retains 'Neutral'

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Motilal Oswal Report

NTPC Ltd. (standalone)’s reported Q3 FY25 Ebitda came in 2% above our estimates, though adjusted PAT was below due to a higher-than-expected tax rate and previous year-related adjustments. Profitability at the PAT level was also hit by adverse movement in regulatory deferral account balances of Rs 3.6 billion.

Gross generation was up 2% YoY in Q3 FY25 while plant availability across both coal and gas plants improved on a YoY basis. Under-recovery in the coal-based plants stood at Rs 4.7 billion in 9MFY25 and is likely to decline to Rs 3 billion by the end of FY25.

We believe that overall execution has remained slow. Also, the conventional capacity (thermal + hydro) commissioning targets have been downgraded to 2.1/2.2GW in FY25/FY26 (from the 2.7/4.0GW guidance given in the 9MFY24 earnings call).

At the NTPC Green Energy Ltd. level, only 0.5GW capacity has been commissioned in 9MFY25 versus the FY25/26 guidance of 3/5GW. Lastly, we also note that subsidiary NGEL is already trading at the higher end of the 10-15x FY27 EV/Ebitda for RE generation players, and execution slippages could potentially lead to a de-rating.

We currently value NTPC Green at Rs 65/share, at a 25% discount to its current market price.

We reiterate our Neutral rating on NTPC with a target price of Rs 366.

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