NTPC stages a mixed Q2 show; should you buy on dips?

State-run NTPC's shares inched lower on Monday after the power generation firm reported a mixed set of financial results for the July-September period. NTPC shares declined by as much as Rs 5.8, or 2.5 per cent, to Rs 230.8 apiece during the session on BSE. 

The stock settled 0.7 per cent lower at Rs 234.9 apiece on the bourse.

NTPC Q2 results: A summary

On Saturday, NTPC reported a 16.6 per cent year-on-year increase in standalone net profit to Rs 3885 crore for the second quarter of the current financial year. Its revenue declined 0.3 per cent to Rs 40,875.3 crore while margin—a key measure of profitability—improved by 350 basis points to 25.8 per cent, according to a regulatory filing. 

According to Zee Business research, NTPC's net profit was estimated at Rs 3,950 crore, revenue at Rs 42,700 crore, and margin at 25.3 per cent for the quarter ended September 30, 2023.   

The company reported Rs 10,537.5 crore in earnings before interest, taxes, depreciation and amortisation (EBITDA) for the fiscal second quarter, an increase of 15.4 per cent compared with the year-ago period.

The EBITDA fell short of analysts' expectations. Zee Business analysts had pegged the power generator's quarterly EBITDA at Rs 10,800 crore.

The NTPC board declared a dividend of Rs 2.25 per share. 

What analysts say about NTPC after the PSU power company's Q2 earnings announcement

CLSA maintained a 'buy' call on NTPC with a price target of Rs 240 for the stock, suggesting a 1.5 per cent upside from the previous close. The brokerage pointed out that the power generation firm's quarterly performance was impacted by plant overhauls and a lower treasury though its cashflow increased by 2.1 times. 

CLSA expects NTPC to expand its regulated equity by 22 per cent, which it sees driving the company's return on equity (RoE) by 180 basis points over the period between 2023 and 2025. 

AK Prabhakar, head of research at IDBI Capital Markets, said he likes NTPC. "Valuation comfort is there plus its three per cent dividend yield will cushion investors," Prabhakar told Zeebiz.com. 

NTPC shares: Past performance 

NTPC shares have rewarded investors with strong returns in the past few months. The stock grew 29.9 per cent in the September quarter while the headline Nifty50 index rose 2.4 per cent. 

As of October 27, the stock was up 25 per cent in the past year, sharply outperforming a 7.1 per cent gain in the blue-chip gauge.

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