HSBC Global Research is seeing 23% upside potential for NTPC Ltd as it upgraded the Maharatna PSU stock 'Buy' and hiked the target price. The global brokerage is seeing multiple growth levers for the the thermal power company. HSBC Global Research has hiked the target price to Rs 400 from Rs 325 apiece.
In last one year, the NSE Nifty 50 stock has slumped 16% compared to the benchmark index. NTPC is about to break free from this trend, according to HSBC Global Research. Power demand growth will back the revival.
Sluggish power demand and delays in execution of thermal and renewable capacity have driven down stock performance. Now, thermal power execution delays are sorted with two thermal power plants commissioned. The company has another plant with 1.4 gigawatt likely to be commissioned by end of financial year 2026.
NTPC has tied up substantial connectivity, which should improve the pace of renewable energy execution. Near-term battery with thermal power plant could be another source of return on equity accretive capital expenditure.
The power company is experimenting with integrating batteries with its low-cost coal based thermal plants, which will improve the grid connectivity. This move will enhance operational efficiency by limiting backing down and offer cheaper power to power distributing companies.
Large balance sheet, proactive management, deep experience of managing power sector volatility puts it at an advantage place to develop and experiment with multiple new technologies, according to the brokerage.
NTPC has the highest probability to commission all the intended capacity expansion projects because of its being brownfield and real-time market business. RTM business in power generation sector can sell and buy electricity to balance supply and demand in near real-time in typically a 30-minute auction.
Nuclear power remained a long-term aspiration and providing terminal value support. The timeline for nuclear power remained uncertain but the company can replace thermal power for base load, according to HSBC Global Research. Nevertheless, NTPC is ahead of its peers in building nuclear power plants, said HSBC Global research. The RTM regime allows NTPC to experiment without any adverse impact on balance sheet.
With its experience, availability of large infrastructure, and supportive government policy regime, NTPC will likely be at the forefront of nuclear development. HSBC Global Research values NTPC Ltd. on a sum of parts, comprising its regulated-return thermal business, renewables portfolio, and investment in subsidiaries.
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