InCred Equities has initiated coverage on NTPC Ltd with an 'Add rating, saying the power utility is a leader with a 24 per cent market share and has large headroom to grow going ahead. NTPC’s major capacity expansion and stable cash flow makes it a top investment in India’s energy transition space, the brokerage said.
InCred said India’s power sector is on a high-growth trajectory, with installed capacity expected to expand from 442GW in FY24 to 900GW by FY32F. NTPC’s regulated business ensures stable earnings with a 15.5 per cent return on equity (RoE) for thermal projects. It achieved a plant load factor (PLF) of 77.25 per cent for coal plants in FY24 against the industry average of 69.5 per cent.
With captive coal production projected to reach 50 mt by FY27, InCred Equities said NTPC is strengthening supply security and cost efficiency. Its brownfield expansion at Rs 10 crore per MW is set to drive regulated equity CAGR of 9 per cent to Rs 1,34,500 crore by FY27, it said.
"Renewable energy, spearheaded by NGEL, targets a scalable unregulated business model with long-term power purchase agreements or PPAs and the Ebitda margin of 89 per cent ensuring cash flow. With renewables’ share to reach 500GW by FY30F, NTPC is poised to lead India’s energy transition while maintaining grid stability, with peak demand likely to post a 7 per cent CAGR to 366GW by FY32F," it said.
In its SOTP valuation, InCred Equities valued the regulated thermal power business at 1.55 times FY26F book value, pegging subsidiaries and joint ventures at 1.9 times FY26 regulated equity per share, with a 20 per cent holding company discount.
"The renewables segment, led by NGEL’s extensive pipeline, is valued at the current market price. This translates to a target price of Rs 385 or 25 per cent upside from the CMP. We assign an ADD rating to NTPC. Ventures in green hydrogen (5GW), nuclear power (2.8GW), & PSP (8GW) provide further upside potential. Downside risks: Delay in plant commissioning, changes to CERC regulations and reduction in NGEL’s valuation," the brokerage said.
NTPC is India’s largest power utility, with a 17 per cent share in the country’s installed power capacity having 76GW operational capacity and contributing 24 per cent (422BU) to India’s total electricity generation in FY24. NTPC’s robust dual-energy strategy focuses on balancing base-load thermal stability with clean energy expansion.
"Thermal power capacity is set to grow by 25GW by FY32F, which includes 11GW of capacity under-construction and 8.8GW of thermal projects to be awarded in FY25F, supporting the Central Electricity Authority or CEA’s forecast of 80GW additional thermal capacity by FY32F. Simultaneously, NTPC’s listed subsidiary NGEL focuses on renewables, aiming at a capacity of 60GW by FY32F, with operational renewables to rise from 3.3GW in FY24 to 15GW by FY27F," it said.