NTPC share price falls after gap-up opening post strong Q2 results and a share buyback offer

Shares of NTPC jumped over 3% on Tuesday morning to trade at Rs 92.1 per share as investors reacted to the strong quarterly results posted by the company. However, soon the stock slipped into the red, down 1.74% even though the overall market sentiment was positive. The state-run electricity generating firm reported a standalone net profit of Rs 3,504 crore in the July-September quarter against Rs 3,262 crore in the same period last year. With an earnings growth trajectory pointing towards healthy returns over the coming quarters, analysts say NTPC is standing tall. Along with the quarterly results, NTPC’s Board has also approved a share buyback at Rs 115 per share — a 28% premium to yesterday price. 

NTPC’s total income increased from Rs 23,658 crore in the previous year to Rs 26,023 crore. EBITDA came in at Rs 7,200 crore 13.2% higher from Rs 6,300 crore recorded the same period last year. With this EBITDA margin improved to 29.1% from 27.9% in the year ago period. Other income was significantly higher during the quarter at Rs 1,346 crore against Rs 893 crore in the previous year. Analysts at Edelweiss say that NTPC remains a play on strong 15% earnings CAGR over FY20–23E, aggressive renewable positioning, and attractive valuation of 0.6x P/BV. With a target price of Rs 145 per share, Edelweiss has a ‘Buy’ rating on the stock.

Receivables of NTPC stand at Rs 26,800 crore of which Rs 19,000 are due for over 45 days. However, the management  highlighted that NTPC has realized Rs 6,740 crore as part of first tranche released from PFC/REC, they expect to get another Rs 7,500 crore in the second tranche, with receivables reducing by March 2021. 

On the expansion front, “NTPC currently has 12 GW of capacities under construction on a standalone-basis that will likely commission over the next four years, resulting in an increase in regulated equity to Rs 86,000 crore by FY2023E,” said analysts at Kotak Securities. NTPC plans to commercialize 4.4 GW of coal-based capacities this fiscal of which 660 MW has been commercialized so far. Kotak Securities pin a fair value of Rs 125 per share on NTPC with a ‘Buy’ rating.

The equity share buyback at Rs 115 per share is at a 28% premium to yesterday’s closing price. The record date for the buyback is November 13 and it would amount to 2.5% of the market capitalization. “We believe re-rating drivers of operational efficiency improvements; capacity additions and coal mining profits are in place for NTPC,” said brokerage and research firm Antique stock broking limited as it pinned a target price of Rs 130 per share on the stock.