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Emkay Global
NTPC (Buy)
Target: ₹180
CMP: ₹121.85
NTPC continues to win solar/RE bids on the back of its low cost of funding, significantly strong cash flows and project management abilities. NTPC has won 500-MW in ( Solar Energy Corporation of India’s recent 1,785-MW Rajasthan Tranche IV bid. Six players had submitted their bids in the ₹2.17-2.18 range, which highlights stiff competition.
For the last one and a half years, management has been focused on RE. On its base thermal assets, we believe RoE will improve as more plants are commissioned. In our view, these factors will lead to a re-rating.
NTPC's ability to source low-cost funds will enable it to resourcefully attain its RE plan. NTPC is expected to add nearly 35GW of RE capacity by 2027. Moreover, about 10GW of thermal units will be added in the next few years.
NTPC has signed an MoU with ONGC to form a joint venture for the development of offshore wind projects. It has also inked a pact with DVC to develop solar plants on DVC reservoirs and land. NTPC’s recent success in various solar bids indicates a change in its stance and competitiveness. It has strengthened its hydro portfolio with the acquisition of THDC and NEEPCO.
NTPC plans to float an IPO of its RE business in the next 1-2 years.
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