3 Maharatna & 1 Navratna Stocks To Buy Next Week For A Target Price of Up To Rs 430

Top Indian brokerage firms have issued buy calls for the Navratna company NMDC, while the Maharatna CPSEs Gail India, Coal India, and NTPC Ltd have got buy calls for the upcoming week. Motilal Oswal is positive about Gail India and Coal India with targets of Rs 195 and Rs 430, respectively, while Axis Securities is bullish on NTPC with a target price of Rs 345. Sharekhan issued a buy call on NMDC with a target price of Rs. 245.

NTPC Share Price Target

"NTPC is the largest power producer forming 17% of India's installed capacity and 25% of the total generation in FY23. The broad-based economic recovery and infrastructure growth have driven an increase in peak demand, reaching new highs in FY24. This surge in demand, particularly during non-solar hours, has resulted in a resurgence of peak deficits, once again bringing the sector into the spotlight.

NTPC's substantial portfolio in conventional power, with a firm cost-plus business model, positions it well in a growing peak power cycle. This structure contributes to stable cash flows and will facilitate growth led by renewable energy. The CEA projects an incremental coal-based power capacity of 47 GW by FY32, in which NTPC will capture the major chunk with its brownfield power projects. The company has ~10 GW of thermal capacity under construction which is expected to get commissioned by FY26.

It will be awarding thermal capacity of 11.2 GW, which will be tendered over the next 12 months. NTPC has an ambitious target of 60 GW of renewable capacity (RE) by FY32 from the current 3.3 GW. Presently, ~7.3 GW of RE projects are under construction and it has secured tenders and bilateral tie-ups for another 10 GW of RE capacity, creating a visible pipeline of more than 20 GW in the near term. It has also planned various new ventures to diversify from core operations into various green initiatives, such as green hydrogen, energy storage, Nuclear power, green mobility and RE-RTC power which provides further growth optionality and rerating potential," said Axis Securities in a note.

"We initiate coverage on the stock with a BUY rating and value the company by using a SoTP-based TP of Rs 345/share. We value the company's conventional thermal business at 1.8x P/BV on its FY26 consolidated regulated BV. Moreover, we value its RE business at EV/EBITDA of 12x on FY26 EBITDA, which is a premium multiple against the industry average of 9-10x to account for growth tailwinds and evolving RE-RTC optionality. Our TP indicates a potential upside of 13% from the CMP. NTPC is a good portfolio bet given its stable dividend yield. However, further rerating potential is possible if the peak deficits increase in future and from value unlocking through the green energy IPO," added the brokerage.

NMDC Share Price Target

"Earnings outlook remains strong and has further improved given a steep price hike (20%/26% for lump/fines over Sep'23-Jan-24) and robust iron ore sales volume (up 21% y-o-y in 9MFY24). We believe that the company is on track to achieve its production guidance of 47-49 mmt/>50mt for FY24/FY25 supported by likely higher supplies of 2mtpa/2.3mtpa from Bacheli/Kumaraswamy mines. We thus expect NMDC to clock 15%/19% EBITDA/PAT CAGR over FY23-26E along with high RoE of 23-24%. Valuation of 5.2x FY26E EV/EBITDA is reasonable, and stock offers healthy dividend yield of 4-5%," said Sharekhan in a note.

"We have broadly maintained our FY2425 earnings estimate, while raising the estimate for FY26 by 8% to reflect better margins. Strong domestic steel demand bodes well for volume growth, which would be the key earnings growth driver over FY24-26. Moreover, recent demerger of the steel business will reduce capital intensity and improve dividend payout ratio. Valuation of 5.2x its FY2026E EV/EBITDA is reasonable and the stock offers a healthy dividend yield of 4-5%. NMDC has high cash of Rs. 13,919 crore (as of September 2023), which is 22% of its current market capitalisation and the same provide comfort to investors. Hence, we maintain our Buy rating on NMDC with a revised price target (PT) of Rs. 245 (higher multiple given robust growth outlook + rollover to FY26 earnings estimate)," said the brokerage.

Gail India Share Price Target

"We reiterate our BUY rating on GAIL and raise our TP to INR195 as we roll forward our valuations to Dec'25. During FY23-26E, we are modeling EBITDA to report a 32% CAGR driven by: Rising natural gas transmission volumes to 140mmscmd in FY26 from 107mmscmd in FY23; Substantial improvement in petchem segment's profitability over 2HFY25FY26 as new petchem capacity will be operational and low inventories globally will drive re-stocking demand; and Commencement of operations of 3,892km of gas transmission pipelines and 560ktpa of petchem capacity," said Motilal Oswal in a note.

"We expect GAIL's ROE to improve to 15% in FY26 from 9.5% in FY23 with healthy FCF generation of INR45.6b in FY26 (vs. -INR45.3b in FY23), which we believe can drive a re-rating for the stock. Reiterate BUY," stated the brokerage.

"Despite capex mounting 64% over FY24-26E (vs. avg. for FY19-23), we estimate that the company will report a free cash flow of INR45.6b in FY26. Further, we highlight optionality from GAIL Gas, which can provide value unlocking up to INR14.3/share for the parent (GAIL). We value the core business at 12x Dec'25E adjusted EPS of INR13.7, as we roll forward our valuations to Dec'25.

Adding the value of listed and unlisted investments of INR30, we arrive at our revised TP of INR195. Our TP implies FY26E P/B of 1.6x. The stock is currently trading at an FY26E P/B of 1.3x. Reiterate BUY," said Motilal Oswal.

Coal India Share Price Target

"Domestic power demand is expected to grow at 1.1x GDP and reach 1,750bu of power generation in FY24. Considering the various shortcomings of RE, such as low PLF, multiple delays in executions, higher finance costs, etc., the dependence on thermal power plants is expected to mount in the coming years.

This will drive higher thermal coal demand from COAL. COAL trades at an EV/Adj. EBITDA of 4.2x FY26E. We roll forward our estimates to FY26. We reiterate our BUY rating on the stock with a TP of INR430 (premised on 5x FY26E EV/EBITDA). We believe COAL is well placed to capitalize on the growth opportunity ahead," said Motilal Oswal in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.