What should investors do with NTPC post Q2 show: buy, sell or hold?

NTPC share price rose 3 percent in early trade on November 3 a day after the company declared its September quarter earnings and approved a buyback programme.

The company reported Q2FY21 standalone profit at Rs 3,504.80 crore, up 7.4 percent, against Rs 3,262.44 crore in the corresponding quarter a year ago.

Revenue from operations for the said quarter stood at Rs 24,677.14 crore, up 8.4 percent, against Rs 22,764.57 crore YoY.

EBITDA stood at Rs 7,181.3 crore against Rs 6,344 crore YoY and EBITDA margin for Q2FY21 stood at 29.1 percent against 27.9 percent YoY.

The company's board approved a share buyback of 19,78,91,146 fully paid-up equity shares of the face value of Rs 10 each at a price of Rs 115 per equity share for Rs 2,275.75 crore.

The company has fixed November 13, 2020, as the record date for the purpose of ascertaining the eligibility of shareholders for buyback of equity shares.

Here are the brokerages views on the stock:

Dolat Capital

NTPC has announced a buyback of up to 2% of the paid up capital at Rs 115 per share. It added capacity of 984MW H1FY21, including 24MW of renewables.

It plans to achieve 5.5GW of capacity addition in FY21. Its capex target remains at Rs 210 bn in FY21. Its CWIP is expected to fall as more assets are capitalized and it is targeting a 15% CAGR in regulated equity in next three years. Stock is trading at an attractive P/BV of 0.7x FY22E. Maintain a buy rating with a target price of Rs 140 valuing the stock at 1.1xFY22EP/BV.

Sharekhan

Sharekhan has fine-tuned FY2021 earnings estimate to factor in higher surcharge income while largely maintaining our FY2022-FY2023 earnings. It derive comfort from NTPC’s risk averse regulated business model, which provides earnings visibility (expect 19% PAT CAGR over FY2021EFY2023E) as robust commercialisation would drive strong growth in regulated equity base.

Moreover, the balance sheet is expected to improve with reduction in receivables as NTPC would receive outstanding dues from discom under the power sector’s relief package. The acquisition of NEEPCO and THDC India seems a strategic fit for NTPC, given access to hydro power portfolio. NTPC also offers a healthy dividend yield of 7%-8% and is trading at an attractive valuation of 0.6x its FY2023E P/BV (54% discount to historical average one-year forward P/BV of 1.4x). Recommend buy on NTPC with a price target of Rs 123.

Motilal Oswal

Capitalization has picked up pace and Motilal Oswal expect it to drive regulated equity CAGR of 11% over FY20-23E and boost RoE (+100bp accretion). Receivables, though, would remain the key monitorable and it expect the situation to improve as power demand recovers and money from the PFC-REC scheme flows through. The stock trades attractively at FY22E P/BV of 0.7x and dividend yield of ~8%. Maintain buy, with DCF-based target price of Rs 140/share.

CLSA

Research house maintained buy rating with a target at Rs 140. The visible signs of a rebound & ESG focus gets sharper. Q2 saw 18% growth in regulated equity & 23% YoY core PAT growth.

The share of its non-coal generation doubled to 11% led by hydro & gas. The capacity additions will help it expand its RoE 159 bps over FY20-22, reported CNBC-TV18.