With continued capacity additions, the company should see an increase in its regulated equity base, thereby driving its earnings. Regulated equity is the quantum of shareholders’ funds eligible for fixed returns, according to regulations. Analysts at Emkay Global say NTPC
expects to add 5,300 Mw in 2019-20 (FY20) and 5,000 Mw in 2020-21 (FY21), which should result in 15 per cent annual growth in the regulated equity over the next three years.
The underrecoveries from customers, however, remain a critical issue, considering coal supply problems. The plant availability factor till July 19 (FY20) has remained high at 87.2 per cent, compared to 83.8 per cent in the year-ago period due to better coal supplies, say analysts. However, due to rains and flood impacting coal production and dispatches, the Street is watchful now. Analysts say while the management had guided for zero underrecovery in FY20 and the June quarter saw 75 per cent lower underrecoveries, near-term concerns persist.
The stake sale by the government remains a major overhang, say analysts, though Rupesh Sankhe at Elara Capital says NTPC is trading at a historically low multiple of 1x FY21 estimated price-to-book, which looks attractive.