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Neutral stance amid execution and yield concerns

We reiterate our Neutral stance on NTPC with a TP of INR380. After a 17% correction in the share price over the last 12M, valuations at 11x FY27 P/E appear relatively reasonable, even as the long-term project pipeline continues to build up, supported by an expanding footprint in nuclear, PSP, renewables, and green chemicals. However, we maintain a cautious view on execution, especially at NGEL, even though management has guided that 87/80% of capacity slated to be commissioned in FY26/27 already has PPAs tied up. Further, we believe valuations for NGEL (15% of our SOTP) have little room for re-rating and may continue to face pressure. Lastly, we believe the FY27E dividend yield of 2.9% remains modest and lower than peers such as PWGR (FY27: 3.4%).

Decline in power generation weighs on earnings performance

1QFY26 performance:

* NTPC reported a standalone revenue of INR426b in 1QFY26, 6% below our estimate of INR453b (-4% YoY), as there was a decline in power generation. EBITDA came in at INR103b (-17% YoY), 17% below our est., pressured by a surge of 86% YoY in other expenses.

* Reported PAT of INR47.7b (+6% YoY) beat estimates by 8%, mainly on account of higher-than-expected other income and a lower tax rate.

* NTPC Green reported a consolidated revenue and EBITDA of INR6.8b and INR6.0b, respectively, in 1Q, reflecting an 18% YoY growth. Profit after tax (PAT) rose 59% YoY to INR2.2b.

Operational and other highlights:

* NTPC Group’s total installed capacity now stands at 82.6GW (Standalone: 61GW). Group RE portfolio: 8GW operational, 13.3GW under construction.

* The company's gross power generation stood at 91BUs, down 6.7% YoY.

* Plant availability for coal plants stood at 93.5% in 1QFY26 (1QFY25: 92.8%).

* Coal plant PLF declined to 75% in 1QFY26, down 5% YoY, primarily due to grid restrictions impacting generation.

* Hydro plant PLF improved to 59.5% (vs. 57.36% in 1QFY25), while gas plant PLF declined to 11.1% (vs. 23.8% in 1QFY25), as gas stations were operating according to the grid demand.

* Average tariff was INR4.87/unit in 1QFY26 vs. INR4.68 in 1QFY25.

* COD for THDC’s Tehri PSP Units 1 and 2 (250 MW each) was declared on 7th June and 10th July 2025, respectively. Another 500MW is slated for commissioning in 2026.

Highlights of 1QFY26 performance

* Capacity & Generation: Installed capacity stands at 82.6GW (Standalone: 61GW). Gross generation stands at 91BUs, down 6.7% YoY. ? Operational Performance: Coal plant availability improved to 93.5% (92.8% YoY), while PLF declined to 75% (-5pp YoY) due to grid restrictions. Hydro PLF rose to 59.5% (57.4% YoY), while gas PLF fell to 11.1% (23.8% YoY).

* Capacity Expansion: The company added 3.05GW in FY26YTD (vs. 4GW in FY25). 31GW is under construction; 7.2GW new thermal projects are expected to be awarded in FY26. ? Renewables: RE capacity stands at 8GW, with a target of 60GW by 2032. The company aims for 6GW RE addition in FY26 (1.4GW already commissioned).

* PPAs & Visibility: The company aims for strong tie-ups with 87% PPAs for FY26 and 80% for FY27. By FY28, ~93% land, 76% connectivity, and 60% PPAs are expected to be secured.

* Green Hydrogen: It has commissioned a 150kg/day plant and has one TPD facility planned for Simhadri in FY26.

* Financials & Capex: The company has guided for ~INR7t of group capex by 2032. It has refinanced INR48.7b, reducing the borrowing costs by ~2%.

Valuation and view

Our TP of INR380 for NTPC is based on:

* Value of INR219 for the standalone, coal, and other businesses at Mar’27E P/B of 2.2x.

* Value of INR19 for other subsidiaries and INR53 for JV/associates at Mar’27E P/B of 2.0x.

* The stake in NGEL is valued at a 25% discount to the current market price.

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