---
endpoint: analytics
pattern: Power
status: done
latency_ms: 216011
conversation_id: 31e72fa4-1510-4fd4-99c5-8a0f6023383d
citations: 12
created: 2026-05-31 21:15:02Z
---

# How does NTPC’s valuation compare to peers, and what justifies its premium/discount?

# NTPC Valuation vs Peers: A Discount, Not a Premium

NTPC trades at a **meaningful valuation discount** to virtually every comparable Indian power utility on most multiples, yet CLSA argues this discount is **too wide** given NTPC's regulated earnings, transition optionality, and improving return profile. Their 12-month target of **Rs459 (+33% from Rs344.6)** with an **OUTPERFORM** rating is built on a sum-of-the-parts (SOTP) framework that re-rates the core thermal book and capitalises NTPC's renewables subsidiary (NGEL) at growth-utility multiples [5].

---

## 1. Where NTPC Trades Today vs Peers

CLSA's India utility comp table (priced 23 May 2025) shows NTPC is the **cheapest large-cap power name on PE and EV/EBITDA**, while offering competitive RoE and a higher dividend yield [1]:

| Company | FY26 PE | FY27 PE | FY26 EV/EBITDA | FY27 EV/EBITDA | FY26 PB | FY27 PB | FY26 RoAE | FY26 Div Yield |
|---|---|---|---|---|---|---|---|---|
| **NTPC** | **14.4x** | **13.0x** | **7.8x** | **7.0x** | **1.9x** | **1.9x** | **13.7%** | **3.1%** |
| NHPC | 20.9x | 14.8x | 9.5x | 8.8x | 2.1x | 2.1x | 10.5% | 2.6% |
| Power Grid | 17.2x | 16.3x | 9.0x | 8.4x | 2.8x | 2.8x | 17.0% | 3.6% |
| SJVN | 20.0x | 22.0x | 15.4x | 13.2x | 2.5x | 2.3x | 10.8% | 2.5% |
| **Power Avg (regulated)** | **18.1x** | **16.5x** | **10.4x** | **9.4x** | **2.3x** | **2.3x** | **13.0%** | **3.0%** |
| CESC | 13.1x | 24.0x | 7.6x | 7.8x | 1.6x | 1.5x | 8.3% | 3.3% |
| JSW Energy | 23.8x | 20.7x | 8.9x | 5.8x | 2.7x | 2.7x | 12.1% | 0.9% |
| Tata Power | 26.6x | 23.1x | 10.5x | 9.9x | 4.1x | 4.1x | 16.9% | 1.0% |
| **Private Avg** | **21.1x** | **22.6x** | **9.0x** | **7.8x** | **2.8x** | **2.8x** | **12.4%** | **1.8%** |

Quantifying the gap:

- **NTPC trades at ~21% discount to the regulated-utility average on FY27 PE** (13.0x vs 16.5x) and **~26% discount on FY27 EV/EBITDA** (7.0x vs 9.4x) [1].
- Versus **private peers**, the discount widens to **~42% on FY27 PE** (13.0x vs 22.6x) and **~32% on PB** (1.9x vs 2.8x) [1].
- On **dividend yield**, NTPC offers ~3x the yield of JSW/Tata Power, evidence the market is paying for growth optionality at the private names that NTPC delivers as cash [1].

**Strip out NGEL (NTPC Green)** — which is separately listed and capitalised at Rs834bn (89% stake) — and the residual core business is even cheaper: **PE ex-NGEL falls to 11.5x FY26, 10.2x FY27, and 9.6x FY28** [3].

---

## 2. Historical Valuation Context — Already At a Steep Discount

NTPC has structurally traded at a discount to the Nifty (it's a PSU regulated utility). CLSA documents the long-run pattern:

- NTPC has **historically traded at ~51% discount to the Nifty on PE** [4].
- The discount narrowed dramatically through the energy-transition rerating: from a -71% trough in Mar-2020, the stock moved to **a small premium of +7% in Mar-2025** [4].
- One-year forward PE has rerated from **6-7x in 2020 to ~17x at Apr-25** [4].
- CLSA characterises the stock as "trading **above** its long-term discount to the Nifty as it leads the energy transition, while its core business saw a boost from the government's 80GW thermal expansion plan" [4].

So at the absolute index level NTPC is no longer "deep value." Versus its **own utility peer group**, however, it is clearly the cheapest large-cap — that is the disconnect CLSA's OUTPERFORM call exploits.

---

## 3. What Justifies the Multiple — CLSA's Premium-vs-Discount Framework

CLSA's valuation methodology splits NTPC into a low-multiple core regulated business and a high-multiple green vehicle. The SOTP build (Rs459/share target) is [2]:

| Component | Stake | Valuation Basis | Rs/share | Implied premium/discount |
|---|---|---|---|---|
| Core (thermal + hydro parent) | 100% | DCF at CoE 10.7% | **316** | Regulated-utility cash flow stream |
| NTPC Green (NGEL) | 89% | **12x 1-yr fwd EV/EBITDA** at 10% holdco discount | **72** | Premium multiple (growth) |
| NTPC RE | 100% | 10x 1-yr fwd EV/EBITDA | 5 | In-line |
| THDC | 74% | 11x 1-yr fwd EV/EBITDA | 17 | Hydro multiple |
| NEEPCO | 100% | 11x 1-yr fwd EV/EBITDA | 17 | Hydro multiple |
| Koldam HEP | 100% | 12x 1-yr fwd EV/EBITDA | 9 | Hydro premium |
| ASHWINI JV | 49% | 15x 1-yr fwd PE | 10 | Highest multiple — strategic value |
| Hindustan Urvarak | 30% | 11x 1-yr fwd PE | 5 | — |
| RGPPL | 86% | Replacement cost | 8 | — |
| **Total** | | | **459** | **+33% upside** |

Key methodology choices:

- **Cost of equity 10.7%**: 7.0% risk-free + 5.25% ERP + 0.7 beta. CLSA notes "delivery on its lofty goal of 60GW renewables by FY32 would **lower its beta over time**" — meaning NTPC's cost of equity should compress, expanding fair value [7].
- **NGEL valued at 12x EV/EBITDA** (a growth-utility multiple) with only a 10% holdco discount — a clear **premium component embedded in the SOTP** [7].
- **28% of NTPC's SOTP is "clean/green" assets**, and CLSA expects this share "to keep rising as it leads the energy transition" — i.e., the weighted-average multiple should drift up over time [2].

---

## 4. Why a Discount Exists at All (and Why CLSA Thinks It's Too Wide)

**Reasons the market still applies a discount:**
- **PSU / regulated nature** caps RoE at the regulator-allowed band; NTPC's reported RoE of 11-13% has historically lagged private peers in upcycles [8].
- **High leverage**: Net D/E of 1.12x in FY25, falling to ~1.0x by FY28 — heavier balance sheet vs private utilities [8].
- **Thermal-heavy mix** carries ESG-overhang for global investors despite the regulatory hedge.
- **Risks flagged**: delays in equipment ordering/capex, lower utilisation rates, and lower incentives at coal plants could cause a "structural slowdown in earnings growth as well as a peak in its ROE" [12].

**Reasons CLSA argues the discount is unwarranted:**
- **Investment thesis**: "India's #1 power generator, being a regulated utility, faces **no carbon risk**, and its expansion to meet India's energy security should address growth concerns on its core business" [6].
- **Operating leverage is kicking in**: FY26 PAT growth forecast at **+25.4% YoY**, FY27 +12.2% — well above the typical regulated utility — driven by capacity commercialisation and removal of FY25 incentive caps [8].
- **RoE expansion**: Reported RoE rises from 11.6% in FY25 to **13.9% by FY27**, and Power RoE expands to **18.6%**, narrowing the gap to private peers without taking their leverage/execution risk [8].
- **Catalysts**: "India's power demand surprise and NTPC's emerging #1 winner at renewable auctions" [11].
- **Positioning is light**: From CLSA's US NDR (June 2025), **foreign investors are still underweight NTPC** vs Power Grid, despite NTPC's outperformance over the prior three years [10].
- **Investor preference rotation**: At the same NDR, "large, long-only investors were looking to add NTPC" while showing "little interest in expensive private utilities such as TPWR and limited free-float stocks (JSWE)" — suggesting incremental demand should narrow the discount, not widen it [9].

---

## 5. Bottom Line

NTPC's valuation **profile vs peers** (CLSA, May–June 2025):

- **Versus Indian regulated power utilities** (NHPC, Power Grid, SJVN): NTPC is at a **20-25% PE/EV-EBITDA discount** despite a comparable RoE, higher yield, and the largest renewable pipeline among them [1].
- **Versus private peers** (Tata Power, JSW Energy): NTPC is at a **35-45% PE discount**, justified in part by lower growth optionality and PSU status, but arguably overdone given the green-subsidiary value already inside NTPC [1].
- **Versus its own history**: NTPC has rerated from a 7x to a 17x one-year forward PE, no longer "deep value" at the absolute level, but still below the regulated-utility average [4].

**What justifies the *embedded premium* in the SOTP**: a 12x EV/EBITDA multiple on NGEL (premium to thermal), the structural lowering of cost of equity as transition delivery progresses, and the 28%-and-rising share of clean/green assets in the SOTP [2][7].

**What justifies the *discount* the market still applies**: PSU governance, gearing, thermal exposure, and execution risk on the 60GW renewables build-out [12]. CLSA's view is that this discount has compressed but **still has further to go** as NGEL scales, beta declines, and FII positioning rebuilds [10].

---

**Sources**
[1] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — India utility comps table (Power & Non-Power)
[2] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — NTPC SOTP target price valuation
[3] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — NTPC valuation ex-NTPC Green
[4] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — NTPC PE premium/discount over Nifty; 1-yr fwd PE
[5] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — Target price box (Rs459, +33% upside)
[6] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — Investment thesis
[7] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — Valuation details (DCF inputs, beta, NGEL multiple)
[8] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — NTPC (parent) key ratios and valuation
[9] CLSA — India Power Pulse (US NDR feedback), 29 June 2025 — Investor positioning, NHPC at 14x FY27 PE
[10] CLSA — India Power Pulse (US NDR feedback), 29 June 2025 — FII underweight NTPC vs PWGR
[11] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — Catalysts
[12] CLSA — NTPC O-PF (Lofty guidance), 25 May 2025 — Investment risks

## Citations

- [1] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [2] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [3] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [4] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [5] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [6] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [7] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [8] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [9] **607963001LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607963001LinqAlpha.PDF>
- [10] **607963001LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607963001LinqAlpha.PDF>
- [11] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>
- [12] **607960472LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960472LinqAlpha.PDF>

