Recommendation from Power generation & Distribution
This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
NATIONAL THERMAL POWER CORPORATION .:A TRUE POWERHOUSE
HERE IS WHY
✓Dominant market share
✓Encouraging ESG goals
✓Strong financial position
National Thermal Power Corporation (NTPC) is India’s largest energy conglomerate which was established in 1975 to boost power development in the country. Eventually, it has established itself as a dominant power major with presence in the entire value chain of the power generation business. From fossil fuels it has forayed into generating electricity via hydro, nuclear and renewable energy sources. Its consolidated installed capacity of 67,905.5 MW makes it India’s largest power utility company. The above capacity represents 17 per cent of total installed capacity in India, but it has a 23 per cent contribution in total electricity generated in India.
It is also focused on leading energy transitions and sustainability goals as it plans to have renewable capacity of 60,000 MW by 2032. It has incorporated a subsidiary dedicated towards the renewable energy business. Notably, it has won 15 per cent (1,560 MW) of renewable energy bids in India and has 3,000 MW of projects in the development stage. It has undertaken the task of developing the largest solar power park of India of 475 MW.
As regards the financial performance of this power giant, it has posted a resilient show in FY21. It reported net sales of ₹ 1,10,368 crore in FY21, which grew slightly by 1.7 per cent compared to ₹ 1,08,512 crore in FY20.
It added standalone commercial capacity of nearly 2,490 MW in FY21. The EBIDTA stood at ₹ 40,324 crore in FY21 as against ₹ 39,389 crore in the previous year. That is a growth of over 2.3 per cent. Also, the PAT stood at ₹ 14,286 crore, which was the highest ever while it stood at ₹ 11,497 crore in FY20, recording a growth of 24.25 per cent, which is quite high for this mature company. On the liquidity front, the cash flows from operating activities increased from ₹ 23,890 crore in FY20 to ₹ 32,444 crore in FY21 by 35.8 per cent. In Q3FY22, revenue grew by 20.95 per cent YoY to ₹ 33,292.61 crore from ₹ 27,526.03 crore in Q3FY21.
On a sequential basis, the top-line was up by 2.74 per cent. PBIDT was reported at ₹ 11,011.61 crore, up by 25.98 per cent YoY and the corresponding margin was reported at 33.08 per cent, expanding by 133 basis points YoY. PAT was reported at ₹ 4,356.02 crore, up by 58.53 per cent YoY. The PAT margin stood at 13.08 per cent in Q3FY22, expanding from 9.98 per cent in Q3FY21. Glancing at some of the key ratios, the ROE and ROCE stand at 11.9 per cent and 8.1 per cent, respectively. It has a debt-to-equity ratio of 1.7 times but the company has been able to reduce the average cost of debt from 8.07 per cent in FY20 to 6.24 per cent in FY21.
The stock is trading near the PE multiple of 7.85. It has a good dividend yield of 4.72 per cent. To strengthen its financial position, the corporation has diversified into the fields of consultancy, power trading, training of power professionals, rural electrification, ash utilisation and coal mining as well. On the inputs side, it has long-term supply contracts with Coal India Limited and Singareni Collieries Company Limited (SCCL) for its coal requirements. Besides, it has its own three coal blocks to serve the need. Considering the sheer presence and market share of this powerhouse in India, and the energy transition that it is aggressively undertaking, we recommend our reader-investors to BUY this scrip.
