PSU NTPC Ltd reported a muted single-digit growth in net profit for the December quarter, in line with Street expectations, as the base quarter numbers were lifted by other income in subsidiaries. The overall execution remained slow and the conventional capacity commissioning targets were downgraded, analysts said.
That said, they see increasing peak deficit to drive plant loan factors (PLFs). They also expect incentives for NTPC’s coal plants over FY26–27 and said on-time commissioning of planned thermal and renewable energy capex, its resultant growth in profits and rising contribution of subsidiaries and JV profits may boost NTPC's consolidated profits going ahead.
"The ordering for thermal projects is progressing; however with bunching of projects we remain cautious on capacity addition in FY25 and FY26. We maintain our Buy rating on the stock with a revised target price of Rs 359 (earlier Rs 471) valuing at 2.3 times December 2026 regulated equity of thermal business and 14 times December 2026 Ebitda of RE business," JM Financial said.
MOFSL said NTPC's standalone Q3 Ebitda came in 2 per cent above its 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 360 crore. Gross generation was up 2 per cent YoY in Q3 while plant availability across both coal and gas plants improved on a YoY basis. Under-recovery in the coal-based plants stood at Rs 470 crore in 9MFY25 and is likely to decline to Rs 300 crore by the end of FY25," it said.
The brokerage also noted that subsidiary NTPC Green Energy Ltd is already trading at the higher end of the 10-15 times FY27 EV/Ebitda for RE generation players, and execution slippages could potentially lead to a de-rating. MOFSL currently values NTPC Green at Rs 65 per share, at a 25 per cent discount to its current market price. The brokerage maintained its 'Neutral' rating on NTPC with a target price of Rs 366.
"We retain NTPC as our top pick in power utilities on inexpensive valuations despite 10 per cent EPS CAGR over FY24–27 driven by 23GW thermal/RE capex and potential of rising CERC incentives. Maintain ‘BUY’ with a revised target price of Rs 412 at 2.5x FY27E SA book and NTPC Green at a 30 per cent discount to CMP," Nuvama said.
This brokerage is anticipating a strong Q4 on high PLF incentives and falling under-recoveries.