Rs 41,70,00,00,00,000 CAPEX Plan: BUY Maharatna PSU Energy Stock For Rs 420 Target, 32.50% Dividend Ahead

Maharatna PSU in the energy sector, NTPC is in focus on June 11 as report stated that the company is planning a massive capex of 50 billion dollars over the next 10 years. In rupee terms, the CAPEX is about Rs 41,70,00,00,00,000 or Rs 4.17 lakh crore. NTPC is also scheduled to pay dividend of 32.50% for FY24 anytime soon. The stock was trading higher.

NTPC Share Price:

NTPC performed at Rs 366.75 apiece, up by 0.6% on BSE at the time of writing, with a market cap of Rs 3,55,625.23 crore. On June 11, in the early trade, the stock touched an intraday high of Rs 372 which was near its 52-week high of Rs 395 apiece.

YTD and NTPC shares are up by 19%. In a year, the stock gained by 98% on BSE.

The upbeat performance comes after Mint report said that the state-run is planning capital expenditure of $50 billion or Rs 4.17 lakh crore over the next 10 years to become a true energy company from just a generator of power.

Notably, NTPC has not made any official statement about the development, and hence GoodReturns.I could not confirm the same.

NTPC Dividend:

The company has recommended the final dividend at the rate of 32.50% or Rs 3.25 per share) for the financial year 2023-24, subject to the approval of the Shareholders in the ensuing Annual General Meeting. The aforesaid final dividend is in addition to the first interim dividend at the rate of Rs. 2.25 per share & second interim dividend at the rate of Rs. 2.25 per share of face value of Rs. 10/- each for the financial year 2023-24 paid in November'23 & February'24, respectively.

Since February 2005, NTPC has delivered up to 41 dividends, as per Trendlyne data.

Also, the company issued bonus shares in the ratio of 1:5 in March 2019.

BUY NTPC Share Price:

According to Axis Direct, NTPC's Robust Thermal Assets Provide Cash Flow Visibility. It's aggressive renewable
capacity addition target, where it can mobilise funds at a lower cost of debt (~6% vs. 7-9% compared to private peers) puts it in a competitive position. Furthermore, NTPC has the Potential to supply RE-RTC power which can generate competitive tariffs. We believe NTPC is a good portfolio bet given its stable dividend yield, and a further rerating potential can not be ruled out if the peak deficits increase in future.

On the valuation, the brokerage said, "We maintain our BUY rating on NTPC. We value the company's conventional thermal business at 2.3x (from 1.8x) P/BV on its FY26 consolidated regulated BV. We value its RE business at EV/EBITDA of 12x on FY26 EBITDA."

In its recommendation rationale, Axis Direct highlighted three key factors. They are:

1. 15.2 GW of thermal capacity to be added to the pipeline: NTPC expects to add 15.2 GW of thermal capacity which will be tendered in the next 2-3 years (8 GW tied up to PPA), in addition to the existing 9.6 GW of under-construction thermal capacity. In Q3FY24, the thermal capacity addition pipeline was at 16.8 GW.

2. RE targets: NTPC has an ambitious target of 60 GW of renewable capacity (RE) by FY32. Presently, 8.4 GW of RE projects are under construction, 11.2 GW are in the tendering phase and 4.8 GW equivalent land bank is available, presenting a tangible pipeline of 24.4 GW. It plans to commission 16 GW of RE capacity over the next three years (FY25/26/27 at 3/5/8GW).

3. Under-Recovery: Barauni plant is now discontinued (vintage plant) and Barh tube leakage issues are resolved. Excluding these two plants, under-recovery was at Rs 150 Cr, which is mainly towards high/low demand season regulation which is now discontinued through policy advocacy. As a result, in the future under-recovery is expected to be at a minimum level.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.