We maintain our ‘buy’ rating on NTPC with a revised target price of `170/share (from `160 previously) based on rollover to March 2018E earnings. A large capacity pipeline that will likely commission over the next three years and translate in 12% CAGR in earnings, coupled with the comfort of regulated return business work in favor of NTPC. A more aggressive build-up of renewable assets and/or inorganic growth could help further improve the return profile. We currently factor commissioning of 3.3 GW for FY2017E and 5.9 GW in FY2018E. Absence of earnings growth in FY2017 should be seen in context of the low effective tax rate in FY2016.
NTPC currently has ~20 GW of capacity under construction, of which as much as 19 GW will likely commission by end-FY2019 leading to 12% CAGR in earnings over the next three years. Potential asset acquisitions as well as foray in solar power could further propel earnings, besides improving the overall return profile of the company. At 10X P/E and 1.1X P/B on FY2018E earnings, NTPC has the comfort of a regulated return business with strong growth visibility.
NTPC has a strong pipeline of capacity addition with capacities aggregating 20 GW currently under construction and likely to be commissioned by FY2020.