Two Power Sector PSU Stocks Showing Growth Potential, Top Brokerage Assigns Buy For High Returns

HDFC Securities in its Power Sector 3QFY23 report published on January 11, 2023, has picked these two PSU stocks with a Buy call. These stocks are NTPC & NHPC. Both the stock comes under the ownership of the Ministry of Power, Government of India.

NTPC is a large-cap Maharatna public sector company with a market capitalisation of Rs 1,61,013 crore. It is India's largest power utility with an installed capacity of 70,884 MW (including JVs). NHPC is a Midcap Miniratna Category -1 public sector company, having a market capitalisation of Rs 39,326.31 crore. It is Government of India's flagship hydroelectric generation company.

According to the brokerage, The power industry is expected to report 28.5% YoY earnings growth, owing to the strong generation growth (+7.3% YoY in Q3FY23) and improved coal availability. Peak power demand increased by 10% YoY during Q3FY23 to ~193GW.

NTPC Limited

HDFC Securities has assigned buy on the stock with an unchanged Target price of Rs 192/share. According to the brokerage firm, if you purchase the stock at the current market price, it could fetch a return of up to 16% from its current level. 

The stock of the NTPC last traded at Rs 1,66.05/share on NSE, down 1.13% from its previous close of Rs 167.95/share. The stock recorded 52 week low on 24 February 2022 at Rs 123.65/share and 52 week high on 1 November 2022 at Rs 182.95/share, respectively. 

The stock has given 25.51% positive return in the last 1 year, however, in the last 1 month it has fallen by 2.04%. It gave 38.03% positive return in the last 3 years. In the last 5 years, it gave 14.85% positive return. 

According to the brokerage, Generation is expected to increase significantly by 13.1% YoY to 82.2 BUs, led by strong demand during the festive season. Realisation too is expected to rise 20.5% YoY to INR5.0/unit, led by a rise in fuel cost. This would increase the topline/PAT by 36.5%/6.0% YoY. Both PLF and PAF are expected to improve in Q2FY23. NTPC added 630MW of solar capacity in Q3FY23, taking the overall installed capacity to 70.9GW on a consolidated basis. 

NHPC Limited

HDFC Securities has assigned a buy on the stock with a target price of Rs 50/share. It claims a potential upside of up to 28% from its current level considering the given target price and the current market price of the stock. 

On NSE, the share price of NHPC last traded at Rs 39.15/share. The stock recorded its 52 week low on 29 march 2022 at Rs 27.05/share and its 52 week high on 27 October 2022 at Rs 46.90/share, respectively. 

The stock in a year has given 26.09% positive return, however, it fell 5.43% in the last 1 year, giving a negative return. In the last 3 years, it gave a maximum 61.44% positive return. The stock in the last 5 years gave 21.4% positive returns. 

According to the brokerage, The company is expected to report a flat quarter YoY with a marginal rise of 2.1% in earnings. The overall generation is expected to decline by 10% YoY. Key aspects to watch out for: (1) progress across Parbati II and Subansiri projects; (2) outstanding dues across discoms. 

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.