NTPC shares tank 3% post Q2 numbers. What should investors do?

Shares of NTPC tanked 3 per cent in Monday's trade after the power utility reported a 7 per cent drop in consolidated net profit at Rs 3,417.67 crore for the September quarter, mainly due to higher expenses. A few brokerages have price targets that suggest up to 24 per cent potential upside on the counter.

NTPC's profit stood at Rs 3,690.95 crore in the year-ago quarter. Total income for the quarter rose to Rs 44,681.50 crore in the September quarter from Rs 33,095.67 crore in the same quarter last year.

The scrip, which is up 47 per cent from its 52-week low of Rs 118, fell 3 per cent to hit a low of Rs 169 on BSE. The stock has delivered a 98 per cent return to its investors in the last two years.

ICICI Securities said NTPC delivered a stable performance in the September quarter despite a Rs 720 crore fixed-cost under-recovery due to a planned shutdown, reduction in other income due to lower LPS, and higher tax incidence on account of higher DTL on renewable energy (RE) capacity commissioning.

This brokerage has maintained a 'Buy' call on the stock with a target price of Rs 210, factoring in the recently announced 6.1GW of additional coal capacity to be set up over the next 5-7 years.

"We have considered 10 GW of operational RE capacity by FY25E, giving it a platform value of 10x EV/Ebitda with an equity value of Rs 22,000 crore. NTPC continues to be one of our top picks led by its strong operational performances in the past few quarters, growth prospects and green energy initiatives," the brokerage house said.

According to Elara Securities, the stock is trading at a historically low valuation of 1 time FY24E price to book value, which it said seems attractive.

NTPC is looking to add 4 GW of renewable energy capacity in the next two years, as per management. Higher capex for the RE portfolio may bolster growth, Elara said.

"We reiterate 'Buy' with a higher target price of Rs 209 from Rs 194 due to better visibility on regulated returns and traction on RE initiative based on 1.5 times regulated equity FY24E P/BV, 1 time (unchanged) regulated equity in CWIP and 1 time (unchanged) cash & investments," it added.

The stock trades above 5-, 10-, 20-, 100- 200 DMA.