Buy NTPC, target price Rs 137: Motilal Oswal

Motilal Oswal has given a buy rating to NTPC with a target price of Rs 137. The share price moved down by 0.53 per cent from its previous close of Rs 103.75. The stock’s last traded price is Rs 103.20.

NTPC Ltd., incorporated in the year 1975, is a Large Cap company (having a market cap of Rs 102705.50 Crore) operating in Power sector.

For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 26194.76 Crore, down 13.27 % from last quarter Sales of Rs 30201.08 Crore and up 1.02 % from last year same quarter Sales of Rs 25931.11 Crore. The Company reported net profit after tax of Rs 2814.89 Crore in latest quarter.


Investment Rationale
The brokerage had built-in FGD-related capitalization over FY21-24 at 15.5% RoE for NTPC. Accordingly, given the current interest scenario, the regulated return expectations have been lowered. It assumes 11% RoE on FGD capitalization (~450bps decline). As of 1st Apr’20, SBI’s one-year MCLR stood at 7.75%, implying RoE of 11.25%. The same would result in 1-2% EPS decline in FY22/FY23E for NTPC; it has revised TP to INR 137/sh (from INR139/sh earlier).

Promoter/FII Holdings
Promoters held 51 per cent stake in the company as of June 30, 2020, while FIIs held 11.4 per cent, DIIs 34.7 per cent and public and others 2.9 per cent.