NTPC: Retain ‘buy’ with a TP of Rs 145; performance is expected lines

NTPC’s overall Q3FY21 performance is in line with our expectations. Highlights: Liquidation of overdue receivables by 15% to Rs157 billion is a key positive; it is likely to reduce to Rs80 billion by March-21. The company continues to progress well on renewable diversification (won 1.2GW in last three months). The CWIP ratio is down to less than 30%, indicating higher profitability going forward.

In our view, the key concern — a deteriorating balance sheet profile — has begun to recede. Furthermore, capacity commercialisation of 11GW over the next two years is likely drive a strong 15% earnings CAGR. The stock’s valuation is compelling at (0.7x P/BV). Maintain ‘buy’ with a TP of Rs 145

NTPC volumes in Q3 increased 7% YoY to 65.4billion units in line with power demand, resulting in overall revenue growth of 4% YoY to Rs 245billion.