Stock of this state-run power producer can double in 4 years, says CLSA

NHPC share news, CLSA on NHPC: Hong Kong-based global brokerage CLSA has upgraded state-run entity NHPC to 'high conviction outperform' rating from the earlier 'outperform' call. However, the target has been slashed a tad lower to Rs 117 from the earlier Rs 120. The new set target implies a potential upside of 57 per cent from the previous close.

The global brokerage has upgraded the stock as after the recent correction to the tune of 25 per cent in the last six months, the stock is available at an attractive price. Furthermore, it anticipates the stock to double in share price in the next four years.

On the upgrade, shares of the company in Thursday's trade zoomed over 4 per cent to the day's high price of Rs 77.64 per share.

Triggers for NHPC

An improvement in Return on Equity (RoE) together with new projects are deemed as key triggers for the utility company. Importantly, NHPC accounts for 15 per cent share in India's hydro-capacity, while in the Under Construction projects, it has 67 per cent share.

"The renaissance in hydropower with India announcing net zero validated by a rise in ROEs and a slew of new project awards to NHPC are rerating catalysts," noted the brokerage.

Other positives

The brokerage further anticipates earnings growth at the PSU from entry in pumped storage projects. Reportedly, the company plans to invest approximately Rs 84,000 crore towards setting up 22 gigawatts (GW) of pumped storage capacity.

NHPC's largest project, Parbati 2, shall commence full generation from 4QFY25, said CLSA.

Furthermore, the brokerage expects regulated equity to scale to 2 times by FY28. Regulating equity was at 27 per cent in Q1FY25. Likely 2x in regulated equity over FY24-28 as large projects reach fruition to drive EPS, adds CLSA.

Eyes listing of NHPC Renewable Energy in next two years

The company is eyeing the listing of its renewable energy subsidiary- NHPC Renewable Energy within the next two years, noted the brokerage.