NTPC rating: Maintain ‘buy’ with unchanged target price of Rs 165

NTPC‘s standalone adjusted profit in Q1FY21 was Rs 27.1 billion (down 7.8% y-o-y), but adjusting one-time rebate on fixed charges to discoms of Rs 8 billion (pre-tax), adjusted profit increased 14.8% y-o-y to Rs 33.7 billion. Being the first full quarter post the acquisition of THDC & NEEPCO, NTPC’s adjusted consolidated profit increased 21.3% to Rs 38.5 billion.

The company’s core RoE remained strong at 19.5%, but fixed cost under- recovery was at Rs 2.3 billion (Rs 1.2 billion in Q1FY20). On Q1FY21 consolidated profit basis, annualised EPS comes to Rs 15.4, Q1FY21-end RoE at 12.5% (pre-exception) and book value/share at Rs 124. Thus, NTPC is on course to achieve the FY21E target EPS of Rs 12.3/Rs 14.5 for standalone/consolidated entity (ex-rebate offered). Core earnings remain strong, which will be further strengthened by the robust commissioning pipeline and green initiatives. Maintain ‘buy’ with an unchanged target price of Rs 165.