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India is the 3rd largest producer and consumer of electricity in the world. The growing demand for electricity and increasing per capita electricity usage may trigger higher growth potential for India’s power sector.
National Thermal Power Corporation or NTPC as we commonly call it is at the forefront to enjoy the growth of electrification in the country.
The key metrics of electricity generation and per capita increase in consumption of electricity are steadily rising, as shown in the image below:
NTPC Stock got the Maharatna status in May 2010.
There are 13 Maharatnas CPSEs in India, as of March 2024. The Maharatna status is granted to companies that have achieved a net profit of over Rs 5000 crore for three consecutive years while maintaining an average annual net worth of ₹15000 crore for 3 years or an average annual turnover of Rs 25000 crore.
Additionally, it is a part of Nifty 50, which is the India’s benchmark index. To know more about Nifty 50 stock read; All About NIFTY50, Components of NIFTY50, and How to Invest in it
NTPC stock has already performed superbly over the past few years. It has moved from its March 2020 lows of Rs 74/share to Rs 344/share as of 12th March 2024.
So, should you bet on NTPC stock for a long term investment? Let’s find out in this blog with a comprehensive analysis of the company financial, key performance of NTPC stock.
Company Overview
NTPC, established in 1975, aims to advance power development in India. Over the years, it has become the leading energy conglomerate involved in all aspects of power generation. Initially focused on fossil fuels, NTPC has expanded into hydro, nuclear, and renewable energy sources, which will help reduce its carbon footprint and greenhouse gas emissions. Additionally, the corporation has diversified its operations into consultancy, power trading, professional training, rural electrification, ash utilization, and coal mining to bolster its core business.
NTPC primarily focuses on generating and selling electricity. However, it has expanded its operations into various other sectors including consultancy, power trading, professional training for power industry, rural electrification, ash utilization, and coal mining. It has also entered into the EV charging infrastructure business. Company has installed a power generation capacity of 69 gigawatt (GW).
Revenue Mix Segment-Breakup
The company’s revenue breakdown is as per segments: Generation of energy -93 % and Others-7%. The segment generation of energy includes the power generation and sale of bulk power to State Power Utilities. The consultancy, project management and supervision, energy trading, oil and gas exploration and coal mining are coming under the head of ‘Others’.
Financial Highlights of NTPC Stock
During H1 FY24, Revenue growth was muted as gross power generation (standalone) in H1 FY24 stood at 179 BU (billion units) as compared to 176 BU in H1 FY23, which was an increase of just 2% YoY. Costs have declined resulting in an improved EBITDA Margin. Net profit increased by 30% YoY during the same period.
In Q3 FY24, despite a decline of revenue by 4% YoY, the net profit of NTPC increased by 7.3% YoY. You can view the net sales of NTPC over the several past quarters from StockEdge.
Other than quarterly net sales, you can even view the entire profit and loss statement of NTPC from StockEdge.
Also, being a major thermal power generating company, NTPC had registered the highest ever coal production of ~25.4 MMT during 9M FY24, registering a growth of ~74% YoY.
The commercial capacity of NTPC stood at 57,838 MW on a standalone basis and 73,824 MW for the NTPC group as of September 30, 2023. During H1 FY24, NTPC added 1,570 MW of commercial capacity to its portfolio, with 110 MW coming from renewable resources. The coal Plant Load Factor (PLF) stood at 76.6%, maintaining a spread of approximately 8% above the national average. The materialization of coal against the annual contracted quantity was ~95.8%, and coal supply stood at 113 million metric tons (MMT), with a record coal production of 16.1 MMT, representing an 83% YoY growth.
NTPC showcased a strong commitment to renewable energy, commissioning 3,314 MW of renewable energy projects, with an additional 7,258 MW under construction. The company secured tender and bilateral tie-ups for 10 GW of ultra-mega renewable capacity, creating a visible pipeline of 20 GW in the near term.
SWOT Analysis of NTPC
We’ll conduct a SWOT analysis of the company to gauge its strengths, weaknesses, opportunities, and threats. This analysis will provide insights into the company’s competitive position and potential risks, aiding in making informed investment decisions.
Strength
NTPC had a leading market share of ~17% in installed capacity as of March 2021, and its share in Electricity generated in the country during FY21 stood at 23%. As earlier mentioned, NTPC has Maharatna status amongst PSUs, and the government is the majority stakeholder with a 51.1% share. The company accounts for nearly one-fourth of the total power production in the country, which makes it strategically important to the government. The thermal power capacities are fully backed by long-term power purchase agreements (PPAs). These agreements assure the full payment of fixed expenses and debt servicing charges as well. Thus, the margins are safeguarded to some extent.
As far as margins are concerned, the EBITDA margins of NTPC can be viewed from the ratio analysis tab of StocKEdge as shown below:
Weakness
The expenditure growth was higher than that of Revenue, which eroded the margin. The Plant load factor was reduced during the time of COVID-19. However, during 9M FY24, the coal PLF (plant load factor) of NTPC stood at 76.4%, against the national average of 68.6%.
Opportunity
NTPC aims to achieve a renewable energy capacity of 60 gigawatts (GW) by 2032, with plans to develop the country’s largest solar power park. Currently, it is constructing a capacity of 16 GW and aims to expand further, aspiring to become a 130 GW company by 2032. The management is focusing on becoming an integrated energy company with power generation as a mainstream and significant presence in EV, green hydrogen, power trading, waste to energy and biomass.
The half of the capacity of the solar power park is expected to be commissioned in 3 years and complete commissioning is anticipated to be in 5 years from the allotment. The sale of power from this park can be targeted through any of the Tariff Based competitive Biddings, as the transmission charges are waived for RE Power till June 2025.
Currently, the main focus of NTPC is on the renewable energy segment. As part of this focus, the company has recently established a wholly owned subsidiary called NTPC Green Energy to explore opportunities within this segment.
Threat
The debtors of the company i.e. State Power Utilities may delay the payments which increases the working capital cycle. The stock has been underperforming.
Conclusion
The power sector in India is experiencing notable changes, reshaping its industry landscape. The ongoing economic growth is fueling the demand for electricity in the country. NTPC is poised for further growth, with plans to add 10 GW of conventional capacity and 16 GW of renewable energy capacity in the next three years. The company envisions surpassing 130 GW of overall capacity by 2032, with a focus on commissioning approximately 15 GW of renewable energy capacity by FY26.
NTPC’s future outlook also includes ongoing discussions with the government for renewable energy pumped storage projects and a commitment to maintaining a coal inventory of 88.5 days at its stations. Additionally, the company anticipates higher turnover from capital Work in Progress (WIP) and gross block due to a greater mix of renewable capacity and a shorter gestation period.
