Buy NTPC Ltd For Target Rs. 359 By JM Financial Services
3QFY25: Impacted by softness in demand and muted execution
NTPC reported just 2% growth in generation as was expected due to moderate energy/ peak power demand during 3QFY25. The thermal PLF remained flat at 75.98% vs. 75.95% in 3QFY24. Hence overall performance during 3QFY25 is soft with revenue of INR 450bn, 5%/ 0%/ -3% YoY/ JMFe/ Cons. The EBITDA came in at INR 137bn, 20%/ 14%/ 25% YoY/ JMFe/ Cons driven by lower other expenses (-21% YoY). Adj. PAT for the quarter was INR 52bn, - 1%/ +4%/ +1% YoY/ JMFe/ Cons. RE capacity addition too remained below expectations (640 MW during 9MFY25); however management continues to maintain its guidance of 3/5/8 GW RE addition for FY25 / FY26 / FY27. 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 TP of INR 359 (earlier TP of 471) valuing at 2.3x Dec’26 Regulated Equity of thermal business and 14x Dec’26 EBITDA of RE business.
* Renewable energy: NTPC Green Energy (NGEL) added a 155 MW of renewable capacity during 3QFY25 (installed 324 MW in FY24). With this, installed and under construction RE capacity stands at 4.2 GW and 10.3GW. The management during conference call maintained guidance of adding 3GW/ 5GW/ 8GW during FY25/ FY26/ FY27, including inorganic opportunities (NTPC in JV with ONGC is likely to acquire Ayana Renewable with 1290 MW operational solar capacity as per media reports). Company has land and transmission connectivity for RE capacity to be commissioned till FY26.
* Thermal capacity addition and ordering: NTPC has guided for thermal capacity addition of 2.8GW/ 1.5GW/ 1.5GW in FY25/ FY26/ FY27. Additionally, it has taken investment approval for addition of 8GW thermal capacity with an investment of INR 1000bn. Company will award 2.4 GW in 4QFY25 and 7.2GW in FY26. Company has signed 50-50 JV agreement with RRVUNL (Rajasthan Genco) to jointly own and operate the 2320 MW Chhabra thermal power plant and also explore opportunities for its expansion.
* Installed Capacity: NTPC's group installed capacity as of 31Dec’24 stands at 76,598MW (59,168 MW standalone, 17,430MW JVs & subs) which includes 62,194 MW/ 6,511 MW/ 3,725 MW/ 4,168MW of Coal/ Gas/ Hydro/ RE. Unit-1 of Khurja STPP (660 MW) is declared commissioned (COD) from 26 Jan’25. Additionally, 135 MW of renewable capacity has been added in Jan’25, taking NTPC’s total installed capacity to 77,393 MW.
* Nuclear power: The JV of NTPC and NPCIL Anushakti Vidhyut Nigam Ltd. has been constituted to develop Pressurized Heavy-Water Reactor (PHWR). In order to manage and focus on nuclear energy business a subsidiary NTPC Parmanu Urja Nigam Ltd has been incorporated in Jan’25. For its nuclear projects company is planning to conduct site studies at many locations and has also received permission for higher studies in four sites in Madhya Pradesh.
* Coal production: NTPC recorded 10.98MT of coal production during 3QFY25 (+36% YoY) from five captive mines i.e. Pakri-Barwadih, Dulanga, Talaipalli, Chatti-Bariatu and Kerandari. Earlier, it did an annual production of 34 MT in FY24, +48% YoY. As per the management guidance coal production capacity is expected to increase from 40MT in FY25 to 67MT in FY29. (Once there was a king; Downgrade to HOLD)
* Non-Coal PLF: The PLF of gas-fired plants is dropped to 3.42% in 3QFY25 (7.72% in 3QFY24) due subdued demand.
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