NTPC reported strong operational numbers in Q4FY21 on the back of power demand recovery. While reported standalone (SA)/consolidated (cons.) PAT was Rs 44.8/46.5 bn, up 258/205% y-o-y, adjusted PAT was Rs 38.3/40 bn, up 31/25.2% y-o-y, respectively. Strong core earnings backed by 7.3/8.4% y-o-y increase in SA/cons. regulated equity to Rs 663/840 bn helped increase FY21 EPS by 19.2/12.7% to Rs 14.7/15.9. NTPC has doubled its RE capacity addition target by CY32 to 60 GW and is on the right path with 1.5 GW solar capacity won in recent bids and participation in 5 GW of upcoming bids. It will add >13 GW RE capacity in FY22-24.

Receivables declined by Rs 29 bn q-o-q to Rs 128 bn (lower than FY20 level of Rs 142 bn), helped by PFC/REC scheme. NTPC’s final dividend of Rs 3.15/sh takes total FY21 payout to Rs 6.15/share (higher than policy and in addition to 2% share buyback). Maintain Buy.

Operational profitability remains high: In Q4FY21, cons. adj. PAT was 40 bn (up 25.2% y-o-y) and revenue was Rs 301 bn (down 0.3% y-o-y). Standalone adjusted PAT was Rs 38.3 bn (up 31% y-o-y) Revenue was Rs 265.7 bn (down 2.5% y-o-y). Other income was up 62% y-o-y due to higher LPS and dividend income.

Standalone/group gross generation in Q4FY21 was 77.6/91.7BU, up 13.7/20.6% y-o-y. Coal PLF was up 760bps at 77.1%. Average tariff was slightly lower at Rs 3.87/unit as PLF picked up. The installation targets are: FY22 – 5 GW thermal and 1.1 GW RE; FY23 – 4.9 GW thermal and 5 GW RE. FY22 capex target is Rs 237 bn.

RE capacity target doubled to 60 GW: NTPC has doubled its RE targets to 60 GW by CY32 from 30 GW earlier. It is targeting to commission over 13 GW RE capacity by FY24 to reach 15 GW. Current operational RE capacity is 1.35 GW while 2.9 GW is under implementation and 3.3 GW is under various stages of tendering. Year-wise cumulative RE capacity addition targets: FY22 – 3 GW, FY23 – 8 GW, FY24 –15 GW. It will participate in the upcoming 5GW IREDA CPSU scheme. It has also signed MoUs with five states for setting up 17 GW at UMREPPs [Gujarat (4.75GW) and Maharashtra (2.64GW) already signed].

Capacities added help increase regulated equity and EPS: NTPC’s adjusted EPS for standalone/consolidated entity in FY21 was up 19.2/12.7% at Rs 14.7/15.9 aided by strong core earnings due to 7.3/8.4% increase in standalone/cons. regulated equity y-o-y and streamlining of acquisitions.

A robust commissioning pipeline, supported by green initiatives will strengthen core earnings further. Under recovery increased to Rs 6 bn vs Rs 2.5 bn at FY20-end due to initial stability issues at the newly-commissioned units of Darlipali and Lara and ash dyke breach at Kahalgaon. As all issues are now resolved, we expect substantial improvement on this front.

Maintain Buy with an unchanged target price of Rs 165/share. It is currently trading at FY23E standalone P/BV of 0.8x (P/E of 6x) and FY23E consolidated P/E of 5.3x.