Emkay Suggests To Buy This Maharatna PSU Stock For Double Digit Gains: Here's Why

Published: Wednesday, August 31, 2022, 11:49 [IST]

Brokerage firm Emkay has given a 'Buy' call on the Maharatna PSU stock from the power space-NTPC. The brokerage for the counter has maintained its target price at Rs. 188 for March' 2023. This at the last traded price of Rs. 164 would mean a potential upside of close to 15%.

Here are the important takes on why the brokerage is bullish on NTPC:

Expansion in brownfield thermal capacity:

In the previous quarter, the company announced its approval of the investment in Talcher Thermal Power Project Stage III (2x660MW) at an estimated cost of around Rs118bn. This was the first step in expanding the brownfield thermal capacity by as much as 5GW in the medium term.

"We believe the recent power deficit in the country (April 2022 and October 2021 saw power cuts in a few states) has prompted this move by the company. Considering that battery energy storage system and pumped storage system are still in their early stages, round-the-clock solutions like brownfield thermal have found their importance in the industry", notes the brokerage.

RE or Renewable Energy portfolio aggressive target in the long term

NTPC currently has about 11.5GW of RE projects under various stages (around 2GWinstalled, around4.1GW under construction, 2.2GW bids won, and 3.2GW under tendering). While the long-term target is 60GW by 2032, the company intends to have 14-15GW in
the next few years. NTPC is setting up the country's largest Solar Park of 4.75GW in Gujarat and has invited bids for 3000MWh ESS and 500MWh BSS.

Valuation and outlook on NTPC:

NTPC, with around 69GW of capacity, has huge expansion plans over the next decade - 130GW by 2032 with 60GW of RE capacity. With 16GW of under-
construction projects, it will add 4-5GW per year in the medium term. We believe while NTPC has shown its competitive stance on RE bids , its recent decision to add around 5GW of thermal power provides steadiness in the earnings outlook going ahead. We maintain our Buy rating with March'23 TP of Rs188.

About NTPC:

NTPC is a large cap PSU firm engaged in generation of electricity. The Company is engaged in generation and sale of bulk power to state power utilities. Note the stock of NTPC similar to other PSUs carries a high dividend yield. For the Fy22, at the current share price, its dividend yield is at 4.27%.