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Muted Results, Cautious Outlook

NTPC Ltd owns and operates electricity generation plants that supply power to state electricity boards in India. The company generates power from coal, gas, liquid fuel, hydro, solar, nuclear, wind and other renewable energy sources. It has an installed capacity of ~76 gigawatt (GW).

* Q2FY25 revenues declined to Rs. 44,696cr (-0.6% YoY) in Q2FY25 as generation segment revenues fell by –0.3%YoY. Group generation stood at 220bn units in H1FY25, up from 212bn units in H1FY24 (+3.7% YoY).

* Gross generation reached 186bn units, marking a 3.9% increase over 179bn units in 1HFY24.Other segment saw 4.4% growth in revenue to Rs. 4,168cr.

* Coal-based stations achieved a Plant Load Factor of 76.3%, significantly outperforming the national average of 70.6%. Till September 2024, the company also incurred a cumulative expenditure of Rs.11,585cr for development of coal mines.

* EBIDTA fell 7.1% YoY to Rs. 12,157cr and EBITDA margin declined 190bps to 27.2% due to a rise in other expenses.

* Profit after tax grew 13.8% YoY to Rs. 5,380cr due to movement in regulatory deferral account balances (net of tax).

Valuation

NTPC's Q2FY25 financial performance was muted, characterized by stable revenue and a lower bottom line, despite an increase in coal production. The incurred coal mine development capex and expected roll-out of tenders for over 13.6GW of thermal capacity by FY27 paint NTPC’s focus as turning towards conventional sources, while the to-be-listed subsidiary, NTPC Green Energy, focuses on executing renewable projects. However, we downgrade the stock from BUY to HOLD, valuing it at 10.1X EV/EBITDA, as execution risks continue to remain as an overhang, setting a revised target price of Rs. 434. Note : NTPC shareholders stand to benefit from the IPO listing, as 10% of the IPO is reserved specifically for them.

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SEBI Registration Number: INH200000345