NTPC shares: What MOFSL says on coal-to-synthetic natural gas facility, PSU price target

Motilal Oswal Financial Services (MOFSL) said NTPC’s proposal to set up a 5–10 million tonne per annum coal-to-SNG facility aligned with the Centre’s push for coal gasification, but the brokerage remained cautious on the stock. It said the project, intended to utilise NTPC’s own coal reserves, sought to reduce exposure to imported LNG and improve flexibility at the company’s gas-based stations, which formed around five per cent of the group’s capacity.

While the PSU indicated that SNG could be produced at about $10–12 per mmBtu and claimed this was competitive with imported LNG, MOFSL said the economics would depend on the extent of the expected global LNG oversupply between CY26 and CY28. It added that much of the LNG market remained crude-indexed and could see downward pressure on pricing as crude supply increased in the same period.

MOFSL maintained its 'Neutral' rating on NTPC and kept its target price unchanged at Rs 370. On Friday, the scrip was trading 0.31 per cent higher at Rs 326.20 apiece. MOFSL's target suggests 13.42 per cent upside over this price.

MOFSL said NTPC’s gas-based fleet continued to operate at very low utilisation — with load factors reported between 1.76 per cent and 23.79 per cent in FY23–FY25 — and an assured supply of SNG could support higher usage. Even so, it emphasised that the coal-gasification project would require four to five years for execution and would therefore not alter NTPC’s medium-term earnings trajectory.

The brokerage further said its stance on NTPC remained tempered by concerns around slower-than-expected execution at NTPC Green Energy Ltd (NGEL). It noted that NGEL accounted for around 15 per cent of the company’s sum-of-the-parts valuation, leaving limited room for rerating. MOFSL said the market had already priced in part of the green expansion and that visibility on project delivery remained crucial for any improvement in multiples.

MOFSL also commented on the broader context, stating that coal gasification remained technically challenging for India because of high-ash coal, and that China’s scale in coal-to-chemicals remained far ahead. It acknowledged the government’s incentives of about Rs 85 billion for coal and lignite gasification projects but said NTPC still needed to demonstrate cost efficiency and project reliability before the market could assign higher valuations.

In its assessment of NTPC’s long-term capacity expansion plan, MOFSL said the company reiterated commissioning targets of 9.8GW, 9.6GW and 10.5GW for FY26, FY27 and FY28. However, the brokerage added that execution risks persisted across the portfolio, particularly in renewables.