- Bernstein upgraded NTPC Green Energy to Market-Perform from Underperform
- Execution concerns are largely reflected in the stock, says Bernstein
- NTPC Green's low cost of debt and strong grid connectivity are key strengths
Bernstein has upgraded NTPC Green Energy to Market-Perform from Underperform, arguing that execution-related concerns are now largely reflected in the stock, while the company's low cost of debt and strong grid connectivity provide structural advantages. The brokerage has retained its Rs 85 price target, implying limited downside from Monday's closing price of Rs 88.55.
Bernstein's upgrade marks a shift from its earlier bearish stance, when it expected the company to disappoint on execution and believed valuations were too high.
The key change in its view is that execution misses are now priced in, Bernstein said. The brokerage also highlighted NTPC Green's access to relatively cheap debt and its grid connectivity as strengths that differentiate the company.
Bernstein said NTPC Green has a clear right to win on account of its low cost of debt, and was surprised by the extent to which the company is leading its grid connectivity chart. It expects the company to have access to 19 GW of connectivity by CY2028, more than twice the capacity available under any other player in the renewable energy sector, according to the report.
The brokerage, however, continues to flag execution as a key issue. It said NTPC Green has faced a "haircut" to its execution targets for GW/year and is building significant capacity while dealing with EPC constraints.
At the same time, Bernstein sees substantial ambitions backed by NTPC's parent capital. Management has laid out a target of adding around 11 GW of capacity annually over the next decade, with Bernstein estimating that the company could reach close to 50% of that target.
Bernstein's also said NTPC Green is expensive on EV/EBITDA compared with Indian peers, but has one of the highest expected growth rates among the companies it tracks. The brokerage therefore sees the valuation as more balanced than it did previously.
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