NTPC Shares Dip Despite Strong Q2 Earnings

Shares of NTPC fell by over 3% in early trading on 25 October despite the state run power company reporting strong earnings for the quarter ending 30 September 2024, which beat market expectations. NTPC’s consolidated net profit for the second quarter of FY25 rose by 14% YoY reaching ₹5,380 crore. However, revenue from operations saw a slight YoY decline, totaling ₹44,696 crore for the quarter. The company’s board also announced an interim dividend of ₹2.5 per share, which is likely to attract continued interest from income seeking investors.

Operational Highlights: Power Generation and Coal Production

NTPC remains India’s largest power generator contributing about 25% of the country’s total electricity needs. In the first half of FY25, NTPC generated 220 billion units (BU) of electricity, marking an increase from the 212 BU generated during the same period in FY24. The company’s standalone gross generation in H1 FY25 reached 186 BU up from 179 BU in the same period last year showing a consistent year on year improvement.

Despite this growth in the first half, NTPC’s total power generation for Q2 experienced a slight decline to 88.46 BU from 90.30 BU in Q2 FY24. This decrease came as NTPC worked to increase coal production from its captive mines to offset potential fuel shortages. NTPC’s coal production from its captive mines significantly boosted in Q2 rising to 9.03 million metric tons (MMT) from 5.59 MMT a year ago. For the April to September period, coal output reached 18.67 MMT, a substantial increase from 11.83 MMT in the same period last fiscal year. This increase in coal production supports NTPC’s strategy to reduce reliance on external coal suppliers and manage costs better as energy demand continues to grow.

Plant Load Factor and Capacity Utilization Trends

While NTPC’s power generation remained robust the company reported a dip in its plant load factor (PLF) a measure of how efficiently its power plants are being used. PLF for NTPC’s coal based thermal power plants fell to 72.28% in Q2 FY25 from 75.83% in the same quarter last year. This decrease indicates that NTPC’s coal plants were running slightly below their previous capacity levels, which can be attributed to maintenance activities and possibly changing demand patterns.

Despite this quarterly dip, NTPC’s coal based plants reported a higher PLF of 76.31% for the entire first half of FY25 which outperformed the national average of 70.63%. This demonstrates NTPC’s operational strength in keeping its plants highly utilized compared to industry standards, showcasing its reliability as a power supplier.

Expansion in Installed Capacity and Future Growth Potential

NTPC continues to expand its infrastructure with its total installed capacity growing to 76,443 megawatts (MW) in Q2 FY25 up from 73,824 MW in Q2 FY24. On a standalone basis, NTPC’s installed capacity also rose to 59,168 MW from 57,838 MW in the same period last year. This capacity expansion aligns with NTPC’s growth strategy to meet increasing electricity demand across India and maintain its dominant position in the market. The company has been investing in renewable energy projects to diversify its portfolio and align with India’s green energy goals, and this increased capacity indicates that NTPC is on track to continue growing its footprint in the energy sector.

Stock Performance and Market Sentiment

At 9:26 am on 25 October, NTPC’s shares were trading approximately 3% lower at ₹399 on the NSE, despite strong quarterly earnings. However, the stock has shown significant gains over the past year rising by around 29% so far in 2024 outperforming the Nifty’s 12% return. Over the last 12 months, NTPC shares have surged by 72%, compared to Nifty’s gain of 27% reflecting strong investor confidence in the company’s performance and future potential.

The recent drop in NTPC’s share price could be attributed to short term profit taking following a sustained rally or to market reactions to the slight decline in Q2 power generation and PLF figures. Nonetheless, NTPC’s solid financial performance and commitment to capacity expansion are likely to sustain investor interest over the long term especially with its increasing focus on renewable energy and improved coal production efficiency.