NTPC: Powering India’s Green Transition

NTPC, India’s largest power generation company, is spearheading the nation’s green energy revolution. With a total installed capacity of approximately 73,000 MW at the group level as of FY23, NTPC holds a significant share of India’s power generation landscape, boasting 17% of the total installed capacity and a 24% generation share. Here’s a closer look at NTPC’s vision and investment potential:

Key Insights of NTPC report:

1. Vision for the Future: NTPC’s vision is to become a 130 GW+ company by 2032, with a substantial 60 GW contribution from renewable energy sources. This ambitious goal underscores the company’s commitment to green energy.
2. Diversification into Mining: NTPC has ventured into the mining segment with notable success. In FY23, it operated six coal mines, yielding an impressive 23 million tonnes, reflecting a remarkable 65% YoY increase. The company has set aggressive production targets for FY24, aiming to produce 34 million tonnes of coal. Cumulatively, NTPC has allocated ₹ 9,269 crores for coal mining projects as of FY23.
3. Projects Under Construction: Currently, NTPC has 17,463 MW of projects under construction. This includes 9,300 MW in coal-based plants, 5,900 MW in renewable energy, and the remaining capacity in the hydro segment.

Investment Thesis:

• Growth in Base Business: NTPC’s core business is expected to thrive and outperform its peers in the medium term. It stands out as the only company that has added coal-based capacities over the last five years, reaching an impressive 73,000 MW of consolidated installed capacity. Going forward, NTPC has 9,300 MW of coal-based plants under construction, set for commissioning by FY25-26. This is anticipated to drive 11% generation growth, supported by strong Plant Load Factors (PLFs) exceeding national averages. Consequently, regulated equity is projected to grow at a CAGR of 9%, reaching ₹ 99,000 crore by FY26E from ₹ 77,628 crore in FY23.
• Green Energy Focus: NTPC is making significant strides in diversifying its portfolio towards green energy sources. With a robust approach to expanding its renewable energy capacity, including ventures into green hydrogen, the company aims to achieve nearly 45-50% of its capacity from non-fossil fuel sources by 2030. In the medium term, the target is to reach 60 GW of renewable capacity by 2032. Currently, NTPC has 3,300 MW of installed renewable capacity, 5,900 MW under construction, and approximately 11,000 MW in the pipeline. The management is confident about reaching 20,000 MW of renewable capacity by FY26E. NTPC is also exploring avenues like green hydrogen, nuclear power (in partnership with NPCIL), and commercial and industrial segments.

Rating and Target Price:

• NTPC has unveiled an aggressive plan to add 16,000 MW of renewable capacity between FY24-FY26, which is set to bolster its green energy portfolio and potentially lead to a revaluation of the stock. With an annual addition of 4,000-5,000 MW of renewable capacity and robust growth in regulated equity from conventional thermal assets, EBITDA and PAT are estimated to grow at 16.1% and 16% CAGR, respectively, over FY23-25E.
• ICICI Direct maintains a “BUY” rating on NTPC and values the stock at ₹ 300 per share, based on 1.8x FY25 Book Value.

Summary:

NTPC’s strategic vision for a green energy future, coupled with its substantial presence in the power generation sector, positions it as a key player in India’s transition to sustainable energy sources. Investors may find NTPC an attractive proposition, given its strong growth potential and commitment to renewable energy. ICICI Direct’s “BUY” rating reflects confidence in NTPC’s trajectory and its potential to deliver value to shareholders.

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