The brokerage has a strong view on NTPC mainly on the basis of its continued robust core earnings, which due to its regulated, assured RoE based business model, will be immune to any unanticipated major disruption in demand in the near term.
ICICI SecuritiesNSE -13.06 % has a buy rating on NTPC with a target price of Rs 165/share. The stock is currently trading at FY22E P/BV of 0.67 time (P/E of 5.1 time) with an expected earnings CAGR of 16.9 per cent over FY19-FY22E and a dividend yield of6.5 per cent.
In times of demand-related disruptions, NTPC is trading at attractive dividend yields with regulated business models which do not get impacted even in case of volume decline. In the case of NTPC, since the GoI stake has fallen to 51 per cent, the brokerage does not see further supply through ETFs/OFS.
The share price moved down by -1.36 per cent from its previous close of Rs 88.10. The last traded price is Rs 86.90. Incorporated in 1975, NTPC is a power company with a market cap of Rs 87517.36 crore.
Investment Rationale
The brokerage has a strong view on NTPC mainly on the basis of its continued robust core earnings, which due to its regulated, assured RoE based business model, will be immune to any unanticipated major disruption in demand in the near term, as well as on earnings growth due to the recently commercialised capacities. Its thermal capacity addition pipeline remains strong while acquisitions and renewable capacity addition will add further to its earnings in the medium term.
ICICI Securities has a positive view on the sector because of strong fundamentals does not expect any change in earnings for Q4 of FY20 and FY21 for most of the companies under its coverage.
Financials
For the quarter ended 31-12-2019, the company reported consolidated sales of Rs 25412.39 crore, up 3.89 per cent from last quarter sales of Rs 24459.70 crore and down -.31 per cent from last year’s same quarter sales of Rs 25491.04 crore. The company has reported net profit after tax of Rs 3113.61 crore in the latest quarter.
With earnings as well as dividend yield at all-time highs, especially for PSU stocks such as NTPC and Coal India, the declining bond yields provide a good opportunity for investors to have a look at the utilities sector which has assured returns on equity.
Source: Icici securities
