2.05% Yield: Maharatna PSU Power Stock Upbeat On Winning Big Projects; ICICI Direct Recommends BUY

Powerpack NTPC Limited traded on an upbeat tone this week with Tuesday being no different. The Maharatna stock has touched a new 52-week high of Rs 358 apiece at the start of this week. The reason for the bullish trend is back-to-back super and renewable power projects that the company won. At the latest, ICICI Direct has recommended to buy on NTPC due to its strong capacity addition which is expected to continue.

NTPC's share price traded at Rs 354.95 apiece, up by 0.33% on BSE with a market cap of Rs 3,44,183.16 crore, at the time of writing on Tuesday. In the early trade, NTPC hit an intraday high of Rs 357.55 apiece.

The company touched a new 52-week high on Monday. In a year, NTPC shares have doubled investors' money by rising over 101% on BSE so far. In 5-years, the upside is around 180%.

The bullish tone in NTPC started on Monday after the company announced that it has received investment approval for the Singrauli Super Thermal Power Project, Stage-III (2x800 MW) at an appraised current estimated cost of Rs 17,195.31 crore.

Further, on February 4th, NTPC announced that NTPC Green Energy Limited (NGEL), a wholly owned subsidiary of NTPC Limited, signed a Joint venture Agreement with Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) for the development of Renewable Power Parks and Projects in Uttar Pradesh.

The REpower generated from the proposed JVC shall meet the Renewable Generation Obligation (RGO) of the UPRVUNL.

This is in line with NTPC's objectives.

In a research note, Chirag J Shah, Research Analyst at ICICI Direct said, "Aggressive renewable capacity addition plan to the tune of 16000 MW over FY24E-FY26E, will scale up the green portfolio of the company and lead to rerating of the stock. We value the stock at 2.2x P/BV of FY26E."

Giving the investment rationale, Shah highlighted two major points:

Thermal business to scale up till FY30:

NTPC has been the only company which has added coal-based capacities over the last 5 years and reached an installed base of 73000 MW on a consolidated basis.

Going ahead, NTPC is having 9300 MW of coal-based plants under construction which will be commissioned by FY25-26. Shah's note said, "This we believe will lead to 11% generation growth supported by strong PLFs (averaging above national level PLFs) on thermal business and will help regulated equity growth at a CAGR of 9% from ₹ 77,628 crore in FY23 to ₹ 99,000 crore by FY26E."

Aggressive focus on renewable at centre stage:

With an aggressive approach to expanding renewable energy, including green hydrogen, it aims for nearly 45-50% of its capacity to come from non-fossil fuels by 2030, with the medium-term target of 60 GW of renewable capacity by 2032.

Currently, the company has 3300 MW of installed renewable capacity 5900 MW of projects under construction and ~11000 MW of projects in the pipeline. The management is fairly confident of reaching 20000 MW of renewable capacity by FY26E. NTPC is also striving hard to diversify into areas like green hydrogen and nuclear power (JV with NPCIL).

Accordingly, Shah has set a target price of Rs 400 on NTPC for 12 months period.

NTPC is among the dividend-paying power stocks. Last month, the company turned ex-dividend for its second interim dividend at the rate of 22.50% amounting to Rs 2.25 per share on the face value of Rs 10 each for the financial year 2023-24. Earlier, NTPC paid its first interim dividend of 22.5% amounting to Rs 2.25 per share for FY24. In the financial year 2022-23, the company paid dividends up to 72.50% amounting to Rs 7.25 per share.

Currently, NTPC has a dividend yield of 2.05%.