NTPC's Power Play: Motilal Oswal Maintains 'Neutral' Stance with Rs 380 Target

Leading brokerage firm Motilal Oswal has reiterated its 'Neutral' rating on state-owned power giant NTPC, setting a target price of Rs 380 per share. This assessment comes after NTPC's recent Q4 FY24 earnings, which presented a mixed bag of results despite strong underlying operational commentary from the management.

For the fourth quarter of fiscal year 2024, NTPC reported a standalone Profit After Tax (PAT) of Rs 5,424 crore.

While this figure represents a robust performance, it fell slightly short of analyst expectations. On a consolidated basis, the company's PAT stood at Rs 6,490 crore, demonstrating the broader strength of its diverse portfolio including its subsidiaries and joint ventures. Revenue for the quarter reached Rs 43,760 crore, with Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) reported at Rs 11,830 crore, showcasing healthy operational profitability.

Motilal Oswal's 'Neutral' stance is underpinned by a balanced view of NTPC's current valuation and future growth prospects.

While the Q4 standalone results were seen as somewhat soft compared to estimates, the analysts acknowledge the strategic initiatives and positive outlook articulated by the company's management. A key highlight is NTPC's ambitious capacity addition targets, aiming for a total installed capacity of 75 GW by 2032.

Critically, 30 GW of this expansion is slated to come from renewable energy sources, signaling a significant pivot towards sustainable power generation in line with India's energy transition goals.

The brokerage firm points to several positive catalysts for NTPC. The declining cost of power, a crucial factor for a utility company, is viewed favorably, enhancing profitability and competitiveness.

Furthermore, potential tariff hikes and the company's strategic divestment plans could unlock additional value and improve its financial leverage. The increased capital expenditure (capex) intensity is also seen as a positive indicator of future growth, as NTPC invests heavily in expanding its generation fleet and modernizing infrastructure.

Despite the strong management commentary and clear long-term growth trajectory, Motilal Oswal suggests that the current market valuation fairly reflects NTPC's near-term earnings potential and operational efficiencies.

This 'Neutral' rating indicates that while the company is fundamentally sound and poised for growth, its stock price may not offer significant upside from current levels in the immediate future, balancing its robust fundamentals with its current market pricing.