Shares of NTPC rallied 3 percent on July 31, reaching a 52-week high of Rs 216.65, despite lukewarm earnings in the quarter ended June.

NTPC reported a standalone net profit of Rs 4,066 crore for Q1 2023-24, a 9 percent increase from the previous year, while its revenue declined by 2 percent to Rs 39,122 crore.

CLSA recommended a 'buy' on NTPC's stock with a target price of Rs 240 and predicted a 180 bps rise in return on equity over FY23-25.

NTPC's stock is currently trading at an average Price-to-Earnings multiple of 10 times, with an earnings per share CAGR of 13 percent over FY23-25 and a 4 percent dividend yield.

The company's profit and sales fell short of market expectations, with an average estimate for standalone profit during the June quarter at Rs 4,543.23 crore and sales at Rs 40,404.53 crore.

NTPC recorded gross power generation of 88.55 billion units (BU) in Q1FY24, 2.16 percent lower than the previous year, amidst a record-high power demand of 223.23 GW in India due to soaring temperatures.

The total installed capacity of the NTPC Group stood at 73,024 MW in Q1FY24, up from 69,114 MW a year ago, while the standalone level capacity was 57,038 MW, slightly lower than the previous year's 57,119 MW.

The surge in NTPC's stock to a 52-week high despite lukewarm earnings has garnered attention from investors and analysts, with the financial performance showing promising signs but falling short of expectations.

Thorough research and consideration of individual investment goals and risk tolerance are necessary before making any investment decisions based on CLSA's 'buy' recommendation.

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