NHPC Stock Surges Over 5% After CLSA Upgrade – Should You Invest Now?
NHPC Stock : Shares of NHPC, India’s leading public sector hydropower company, surged over 5% in Thursday’s trading session after global brokerage firm CLSA upgraded its rating to ‘high conviction outperform’. This upgrade signals strong confidence in the stock’s future performance, making it an attractive bet for investors.
Previously, CLSA had assigned an ‘outperform’ rating to NHPC, but with this fresh upgrade, the firm has reinforced its belief in the company’s long-term growth prospects. However, CLSA has slightly revised its target price to ₹117 from the earlier ₹120.
This move comes as NHPC’s stock has witnessed a sharp correction of 25% over the past six months, presenting a lucrative buying opportunity for long-term investors. The brokerage expects the stock to double within the next four years, driven by strong project execution and business expansion plans.
NHPC’s Expansion Plans – A Game Changer?
NHPC is actively expanding its footprint in the renewable energy sector, with ambitious plans for growth. CLSA noted that the commissioning of the Parbati 2 Hydro Project has led to a 27% jump in regulated equity in Q1 of the current fiscal year.
Moreover, NHPC is stepping into the pumped storage sector, which is seen as a game changer for the company. With an investment of ₹84,000 crore, NHPC aims to develop 20 GW of pumped storage capacity. This move is expected to provide stable revenues and drive profitability over the next few years.
The brokerage firm anticipates NHPC’s regulated equity to double between FY24 and FY28, primarily due to the completion of key projects. This expansion is projected to have a significant positive impact on the company’s earnings per share (EPS) growth in the coming years.
Despite these strong fundamentals, NHPC’s stock has declined by 37% from its peak of ₹118. However, the recent uptick in stock price reflects renewed investor interest following CLSA’s bullish outlook.
NHPC’s Plans to Increase Stake in PTC India
Apart from expansion in renewable energy, NHPC is also evaluating an increase in its stake in PTC India, a leading power trading company. Currently, NHPC holds about 4% equity in PTC, along with other public sector companies that have a similar stake.
Speaking on the matter, NHPC Chairman and Managing Director Raj Kumar Chaudhary stated that the company is in discussions regarding whether to increase its holding in PTC India.
“We have made it clear that NHPC is not looking to exit PTC. The question now is whether we want to increase our holding. We will soon communicate our decision to the power ministry,” Chaudhary said.
If NHPC increases its stake, it could further strengthen its position in India’s power trading market, opening new avenues for revenue growth.
Key Financials and Valuation Metrics
NHPC’s financial metrics offer a mixed picture, with strong long-term potential but some short-term challenges. Here’s a breakdown of its key financial ratios:
| Metric | Value |
|---|---|
| Market Cap | ₹79,125 Cr |
| Current Price | ₹78.8 |
| 52-Week High/Low | ₹118 / ₹71 |
| Stock P/E | 29.2 |
| Book Value | ₹40.0 |
| Dividend Yield | 2.46% |
| ROCE (Return on Capital Employed) | 7.67% |
| ROE (Return on Equity) | 9.61% |
| Debt-to-Equity Ratio | 0.85 |
| Promoter Holding | 67.4% |
| Pledged Percentage | 0.00% |
| Price-to-Earnings Ratio | 29.2 |
| EPS (Earnings Per Share) | ₹2.70 |
| Intrinsic Value | ₹29.4 |
| Graham Number | ₹49.2 |
| RSI (Relative Strength Index) | 44.6 |
| QoQ Profits | -68.9% |
| Quarter Profit Variation | -52.5% |
| Industry P/E | 28.2 |
| DMA 200 (200-Day Moving Average) | ₹83.7 |
| Free Cash Flow (Last 3 Years) | ₹561 Cr. |
| Free Cash Flow (Latest) | ₹-57.5 Cr. |
While NHPC has solid fundamentals, its P/E ratio of 29.2 is slightly higher than the industry average of 28.2, suggesting that the stock is trading at a premium. Moreover, its quarterly profits have declined sharply by 68.9%, raising concerns about short-term earnings pressure.
On the positive side, promoter holding remains strong at 67.4%, and the debt-to-equity ratio is at a manageable 0.85, indicating financial stability.
Should You Invest in NHPC Now?
NHPC’s stock correction over the past few months, coupled with CLSA’s strong bullish stance, presents a compelling investment case for long-term investors.
Here are some key reasons to consider NHPC:
✅ Strong Growth Plans: The company is doubling its regulated equity and investing ₹84,000 crore in pumped storage projects.
✅ Attractive Valuation: The stock is down 37% from its peak, providing a potential entry point.
✅ Dividend Yield of 2.46%: Investors can benefit from steady dividends.
✅ Government Backing: Being a PSU, NHPC has solid government support and a strong market position.
However, short-term risks such as profit decline and market volatility should be factored in. Investors with a long-term horizon can consider accumulating NHPC at current levels, while short-term traders may wait for better entry points.
Final Thoughts
With CLSA’s upgraded rating and ambitious expansion plans, NHPC is poised for significant growth in the coming years. While short-term earnings pressure persists, the stock remains a strong long-term bet in India’s growing renewable energy sector.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.