NTPC, Power Grid sink 3% on profit taking after rallying up to 21% in 1 mth

Shares of largecap power utilities NTPC and Power Grid Corp tanked nearly 3 per cent each on BSE in Wednesday's late deals as the broader market also came under sudden selling pressure. The BSE Sensex closed 434 pts lower and the Nifty lost 168 points to end at 22,029.  

The weakness in the two power majors comes due to profit booking after a sharp rally seen in the duo recently. In the last one month, NTPC has jumped 14 per cent and Power Grid is up 21 per cent (excluding today's decline). The BSE Power index has rallied 12 per cent in this period.  

Power Grid on Monday said its board has approved an investment worth about Rs 656 crore for implementation of two electricity transmission projects in the country. Read details

Separately, Bernstein also reportedly initiated an 'outperform' rating on the stock with a target of Rs 315 on Tuesday.

The company is expected to see an increase in capex over the next two years with new growth areas across interstate transmissions, batteries and smart meters, it said, adding that the company has access to steady cash from existing assets and low cost of debt. 

The BSE power index, meanwhile, closed calendar year 2023 with gains of 34 per cent with NTPC and Power Grid surging 87 per cent and 48 per cent, respectively, for the year. The sharp rally came on the back of the industry's rising shift to renewable energy amid high energy needs of the country. 

Analysts at BoB Capital are positive on NTPC as they see its as one of the key players powering India’s economy given its robust thermal portfolio.

"Considering a thrust on renewables and simultaneous enhancement of thermal capacity, we believe the company is well

positioned in the power generation space and hence reiterate our BUY rating," said BoB Capital in its Q3 result review.

NTPC has added 210 MW of renewable capacity in the last 12 months and its installed generation capacity now stands at 73.9GW, of which renewable and hydro power account for 3.4GW and 3.7GW respectively.

The company plans to commission 20 GW of renewable capacity by FY27 and an additional 40 GW by FY32. In the thermal business, it plans to add 16.8 GW of coal capacity, for which awarding is expected to conclude by FY27.

BoB Capital further expects the valuation discount of public utlities like NTPC and Power Grid to narrow ahead as compared to the private peers on strong capex pipeline and robust track record. 

Power Grid in Q3 ramped up its planned capex for FY25 to Rs 150 billion up from Rs 125 bn guided earlier, which the brokerage sees as a key positive. 

Works in hand totals Rs 777 bn, of which tariff based competitive bidding projects stand at Rs 414 bn and the remainder are under regulated tariff mechanism.

For FY26, it has guided for even stronger capex of Rs 200 bn. Further, management indicated scope for further upward revision as further clarity on projects emerges over the next six months.

In the longer term, the company has a Rs 2.1 trillion capex pipeline for the next decade, said BoB Capital. 

For NTPC, it has raised the target price to Rs 370, keeping the BUY rating intact. The brokerage kept the BUY rating on Power Grid too while raising the target price to Rs 320.