EQUITY RESEARCH REPORT

INDUSTRY GROWTH
DRIVERS

The power generation industry in India will require a total investment of Rs. 33 lakh crore and 3.78 million
power professionals by 2032 to meet the rising energy demands, as per the National Electricity Plan 2022-32.
.

Growing Demand Policy Support Higher Investment

India is the third-largest producer and
consumer of electricity with installed
power capacity of 426.13 GW as of
November2023. *Growing population
along with increasing
electrification,Power consumption in
India in FY23 logged a 9.5% growth
100% FDI allowed in the power sector
has boosted FDI inflow in this sector.
Schemes such as Deen Dayal
Upadhyay Gram Jyoti Yojana
(DDUGJY) and Integrated Power
Development Scheme (IPDS) are
expected to augment electrification
across the country.
As per the National Infrastructure
Pipeline 2019-25, energy sector projects
accounted for the highest share (24%) out
of the total expected capital expenditure
of Rs. 111 lakh crore.Total FDI inflows in
the power sector reached US$ 17 billion
between 2000-and 2023.
SECTORAL GROWTH

Source: Ministry of Power

 PARIS AGREEMENT
Paris Agreement, which was adopted in December 2015, aimed to reduce the emission of gases that
contribute to global warming.
PANCHAMRIT
01 India will take its non-fossil energy capacity to 500 GW by 2030.

02
India will meet 50 percent of its energy requirements from renewable energy by 2030.

03 India will reduce the total projected carbon emissions by one billion tonnes from now till 2030.

04 By 2030, India will reduce the carbon intensity of its economy by more than 45 percent.

05 By the year 2070, India will achieve the target of Net Zero.
 FUTURE OUTLOOK

500 GW Non-Fossil Fuel Based However, in absolute terms Coal

Coal's share in the power mix is capacity is projected to rise by
Energy by 2030.
Announced by Prime Minister
projected to decline to 55% in 19%, and generation is expected to
Narendra Modi at COP26 2030. increase by 13% during this
summit. period.
 ABOUT NTPC

NTPC is India’s la rgest energy conglomerate with roots planted in

1975 to accelerate powe r development in India. Since the n it has
established itse lf a s a dominant power major with prese nce in the
entre value c hain of the power ge nera tion business. From fossil
fuels, it has forayed into ge nera ting electric ity via hydro, nuclea r
and renewable energy sources. This foray will play a major role in
lowe ring its carbon footprint by reducing gre enhouse gas e missions.
To stre ngthen its core busine ss, the corporation has dive rsified into
fields of consultancy, power trading, training of power
profe ssionals, rural electrific ation, ash utilization and coal mining
as well.
Board of Directors
The current total installed capacity of the company is 71,594 M W
(including JVs) own stations include 33 coal based, 11 gas based, 1
Hydro,
1 Wind, 29 Solar PV and 1 Small hydro plant.

Commensurate with the count ry's growt h c hal le nges, NTPC has embarked upon an ambi ti ous pl an to
at tai n a total installed capaci ty of
130 GW by 2032. The capac it y wi ll have a diversi fied fuel mix and by 2032, non-fossi l fue l based
generation capacity shall make up nearly 30% of NTPC’s portfoli o
SHAREHOLDING
PATTERN
Government of India (GoI) has reduced its
holding in NTPC from 89.5% in 2004 at
the time of listing to 51.1% as on
December 31, 2022. Government
ownership provides NTPC the financial
flexibility to raise funds from international
debt markets at competitive rates. GoI will
not look to divest further stake in the
company to raise funds as this could lead
to NTPC losing its sovereign rating.
 BREAKUP
OF
REVENUE
Generation of Energy – The C ompany’s principal
business is generating and selling bulk power to
state power utilities.

Others – This segment includes consultancy,

project m anagement and supervision, energy
trading, oil and gas exploration, and coal mining.
 Late Payment Surcharge
and Related Matter Rules
Financial Position of DISCOMS

One of the major concerns about electricity generation companies was the poor financial positions of
state discoms and therefore their delays in payment. To put that into perspective, At the end of August
2021, these three states owed - Rs 3,292 crore (Jharkhand), Rs 5,240 crore (Karnataka), and a
whopping Rs 21,555 crore (Tamil Nadu) to NTPC

Restricting Access to State DISCOMS

By restricting access to the national grid for discoms with overdue payments beyond two and a half
months, it incentivizes timely settlements. This ensures quicker payments for NTPC, boosting their
cash flow reducing working capital drag and temporarily relieve the receivable position allowing for
strategic investments in expanding generation capacity.

Tripartite agreements (TPAs)

NTPC PLANT LOAD FACTOR

NTPC’S PLF is more than the

average PLF of all India coal stations
and it is increasing year on year.This
ensures operating efficiency of
NTPC and helps in lowering its cost
 CAPITAL STRUCTURE

• Current Debt-Equity Ratio is 1.33

• Industry Debt-Equity Ratio is 1.18
• It will remain at around the same number in the forecasted years as the management want to keep
the D-E ratio same as mentioned in its con call
• It will increase in 2024 as management is taking up lots of projects in 2024 for which it
will raise debt.
• Inspite having cash,management takes debt for every project it commissions as its a
government company and can raise debt easily at low rates of interests
REVENUE

• Revenue is increasing year on year with a

CAGR of 9.7%
• NTPC is expanding its thermal energy
capacity by a CAGR of 4%
• The price of Electricity will also increase
due to inflation over the next 5 years
RETURN ON CAPITAL EMPLOYED

ROCE is much higher than

industry average.

ROCE will increase in the

forecasted period due to increase
in revenue and capitalization of
thermal assets to the tune of ₹
80,000 crore till FY26
PROFIT AFTER TAX

• PAT is growing with a CAGR

of 21.23%
• Fuel cost for the year 2024 is
just increasing by 3.21% while
the revenue increases by
11.99%
• This led to PAT increasing by
52.36% for 2024
PROPERTY PLANT AND EQUIPMENT

Huge increase in PPE in 2024,13%

due to various expansion projects
being set up in 2024.

Average Increase in PPE during

the forecasted period is 6.35%.
CASH CONVERSION CYCLE

DCP:55DDAYS
The weak financial he alth of many of the state
distribution utilitie s (discoms) is a reason the DCP
CPP: 40 DAYS be ing slightly high.

IHP: 44 DAYS Inventory Holding pe riod of NTPC is lower than

industry's due to its high demand thus sales are quick.

CCC: 58 DAYS
KEY COMPETITORS AND THEIR MARKET CAPITALISATION
Leading power generators in India as of October 2023, based on revenue

Source: Statista
 LATEST HAPPENINGS IN THE POWER SECTOR

FLY ASH GENERATION AND UTILISATION

Fly ash is defined as per Cement & concrete terminology, ash produced in small dark flecks by the burning of powdered coal or
other materials and carried into the air
 FLY ASH GENERATION AND
UTILISATION BY NTPC
• NTPC has started to collaborate with cement manufacturers across the country to supply fly ash as part
of its endeavour to achieve 100% utilisation of the by-product produced during power generation
• NTPC produces approximately 65 Million Tonnes of Ash annually, out of which 80% (approx. 52
Million MT) is Fly Ash.
• Presently, about 73% of total ash is being utilized for production of cement and fly ash bricks, road
embankment construction, mine filling, low-lying land development, and ash dyke raising.

https://ntpc.co.in/media/press-releases/fly-ash-goes-long-distance-ntpc-begins-transport-ac
ross-country
 SWOT ANALYSIS
STRENGTH

Wid e g eo g rap h ic p resen ce

01
 SWOT ANALYSIS
STRENGTH
Catering to various consumers -NTPC extensive product offerings have helped the
02 company to penetrate different customer segments in Electric Utilities segment.

NTPC’s primary customer segments include:

a) Distribution Companies (DISCOMs): NTPC sells the majority of its generated power to state and private DISCOMs, which are responsible for distributing
electricity to end-users.

b) Industrial and Commercial Consumers: NTPC also caters to large industrial and commercial consumers

c) Captive Power Plants: Some large industries and commercial establishments operate their own captive power plants to meet their energy needs. NTPC sells
power to these captive power plants, ensuring a reliable supply of electricity.

d) Government Entities: NTPC serves various government entities, including central and state governments, which require power for their operations and
public services.
 SWOT ANALYSIS
WEAKNESS

Depleting input materials sources

01
 SWOT ANALYSIS
OPPORTUNITIES

01 Huge demand and supply gap

Source- powermin.gov.in
 SWOT ANALYSIS
OPPORTUNITIES

02 R enewa ble energy

 SWOT ANALYSIS
THREAT

01 Environmental Concerns/ Threat of new govt policies

02 Growing production costs

 SHORT- TERM- HOLD

• NTPC’s share price has given a resolute breakout from a decade long consolidation
indicating structural turnaround and remains one of the preferred picks in PSU pack
• Over past two months, share price has retested its breakout level and made a strong bounce
validating elevated support at decade long resistance which is now acting as support

The stock has provided :

Support at 310
Resistance at 350
Source: TradingView
 LONG- TERM BUY

• NTPC has an impressive revenue growth, growing at almost 9% CAGR which is coupled
with strong capacity addition and an average PAT margin of 15.5 % which is attractive
for this sector.
• The positive growth prospects of this sector itself makes NTPC a good pick for the
investors.
• The long-term resistance line historically has for to five touchpoints, indicating bullish
movements.
Source: TradingView
 Why DCF.
Predictable Cash Flows

NTPC operates in the power generation sector, which typically exhibits relatively stable cash flows, especially for
established utility companies with long-term power purchase agreements (PPAs) and a diversified customer base. DCF
FCFF valuation is well-suited to capture the predictability and stability of cash flows in such industries.

Long-Term Contracts

NTPC often enters into long-term PPAs with various state electricity boards and industrial consumers. These contracts
provide visibility into future revenue streams, making it conducive to using a DCF approach that incorporates cash
flows over an extended forecast period.
 Why DCF.
Debt and Interest Expenses

NTPC typically has debt obligations in its capital structure, and FCFF considers the impact of interest expenses on
cash flows available to investors. By deducting interest expenses from NOPAT, FCFF reflects the cash flow available
to all investors before considering the effects of financial leverage.

Why not Relative Valuation?

Public utility companies like NTPC do not have a large pool of direct competitors that can be used for comparison in
valuation methods like relative valuation. Relative valuation provides a range of valuation estimates rather than a
precise intrinsic value.
 Why not Relative valuation?

Lack of comparable
NTPC is the Market
companies
leader
 CURRENT INTRINSIC
MARKET PRICE VALUE
(AS PER DCF)

335.80 1254.87

RECOMMENDATION- BUY
 THANK
11 YOU
DEVANSH RUPANI

23 JENIL MAKWANA

41 SANIYA AGARWAL

54 VIHA JAIN

59 SHREYA TIBREWAL