NTPC share price jumps after mega Rs 20,000 crore capex plan; should you buy shares?

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Published: May 30, 2019 3:50:10 PM

Shares of state-run electricity major NTPC jumped on Thursday afternoon, after the firm announced a mega capex of Rs 20,000 crore in the financial year.

cerc, tata powerNTPC has reported a 49% rise in Q4 net profit to Rs 4,350.32 crore, compared to Rs 2,925.59 crore.

Shares of state-run electricity major NTPC jumped on Thursday afternoon, after the firm announced a mega capex of Rs 20,000 crore in FY20. NTPC shares gained more than 4.5% to hit the day’s high at Rs 135.95. Notably, the government run power giant has announced that it is eyeing to produce 310 billion units of power and 10.4 million tonne of coal, and spend Rs 20,000 crore on capital expenditure in the current financial year. NTPC has signed a memorandum of understanding (MoU) with the power ministry on various targets to be achieved in 2019-20 on May 23, a company statement said. The firm would also ensure 10.4 million tonne of coal production to strengthen fuel supply to its power stations, compared to 6.8 million tonne in the previous fiscal year.

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NTPC further said that it is committed towards enhancing operational efficiency and simultaneously aiming to increase its revenue by 12% by employing measures to strengthen financial performance for the next fiscal year. NTPC has power generation installed capacity of 55,125 MW. In the latest quarter, NTPC has reported a 49% rise in Q4 net profit to Rs 4,350.32 crore, compared to Rs 2,925.59 crore for the year-ago quarter, on the back of lower expenses.

NTPC’s total revenue for the fourth quarter of 2018-19 tumbled to  Rs 22,545.61 crore from Rs 23,617.83 crore in the comparable period last fiscal year. Expenses reduced to Rs 19,008.44 crore for the quarter compared with Rs 20,229.26 crore, in the last year period. NTPC’s board has recommended a final dividend of Rs ­­2.50 per equity share of the face value of Rs 10 each for 2018-19, subject to the approval of shareholders at the annual general meeting scheduled to be held in August 2019.

Taking stock of the reported results, Motilal Oswal said that operations are turning around as availability of coal improves. “Management expects no fuel-related under-recoveries from FY20 (v/s INR8b in FY19), which will likely boost PAT. Under-recoveries on GCV and O&M are well addressed in the tariff regulations 2020-24, which will also support earnings,” said the report.  Motilal Oswal expects capitalization to pick up pace, driving a regulated equity CAGR of 14% over FY19-21. Capitalization will outpace capex, boosting RoE and driving re-rating of the stock, said the research firm. Motilal Oswal has re-iterated ‘Buy’ on the shares with a DCF-based target price of Rs 158 per share.

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