Global brokerage CLSA has issued a bullish outlook on NHPC Ltd., setting a high-conviction 12-month target price of ₹117. This projection implies a significant 60% potential upside from its current trading range, with CLSA labeling NHPC as the "cheapest 100% clean green stock" available.
According to CLSA, NHPC is poised for substantial growth, driven by 14 identified catalysts that could boost its FY27 earnings by 59%. The firm also anticipates an additional 45% earnings growth in FY28, followed by a decade of double-digit expansion.
Key Growth Drivers and Catalysts
CLSA's optimistic forecast is underpinned by several factors, including India's strategic push towards net-zero emissions and the utilization of Indus and Arunachal River water resources. The brokerage noted a recent dip in NHPC's share price due to government and retail sell-downs, even as Foreign Institutional Investors (FIIs) increased their stake by 290 basis points.
Among the crucial catalysts highlighted by CLSA are:
- Tariff Order Recovery: A recovery from tariff under-recovery is expected as regulators are set to declare tariff orders for NHPC's Parbati and Subansiri projects in the second half of FY27.
- New Capacity Additions: The commencement of another 890MW of hydro capacity will contribute to increased generation.
- Large Project Awards: Future awards of significant projects are expected to sustain decadal double-digit growth.
Earnings and Return on Equity Projections
CLSA forecasts a remarkable improvement in NHPC's financial metrics. The brokerage predicts a 100% higher Earnings Per Share (EPS) and an 810 basis point expansion in Return on Equity (ROE) over FY26-29. This is partly attributed to a "step-change" in Renewable Energy Earnings (REE).
Despite the challenges posed by El Niño, NHPC demonstrated resilience with a 20% growth in generation during the first half of FY27. CLSA expects further momentum in the second half, bolstered by the operational start of Teesta V HEP, 500MW at SL HEP, and the aforementioned tariff orders.
The brokerage projects REE (excluding minority interests) to grow by 90% over FY26-30, a substantial acceleration compared to the 31% growth observed over the preceding five years. CLSA's analysis suggests that investors have a "last chance" to acquire this clean energy stock at its current valuation before these catalysts fully materialize and drive its price upwards.