BHEL and NTPC shares have moved in opposite directions over the past six months, creating a wide gap in the performance of the two PSU power stocks. BHEL shares gained about 63% during the period, while NTPC shares fell around 13%.
Kotak Institutional Equities said the divergence reflects different market expectations for thermal power generation and equipment suppliers.
Kotak Institutional Equities said BHEL’s strong share price performance appears to reflect expectations of continued demand for thermal power equipment. However, the brokerage said the company’s current market value assumes a much larger thermal capacity buildout than government estimates suggest. BHEL’s market capitalisation stands at around Rs. 1.48 trillion.
The brokerage estimated that BHEL would need to execute between 150 GW and 300 GW of boiler, turbine and generator capacity over its lifetime. Even after assigning 25% of BHEL’s value to non-thermal businesses, Kotak said the required execution remains high.
“The current market capitalization of BHEL implies 150 GW of life-time capacity execution at a 10 per cent PAT margin, with the ask increasing further to 200 GW at a 7.5 per cent PAT margin,” Kotak said.
Kotak also examined the possible profit available from future thermal equipment orders. It estimated that the total undiscounted profit pool could range between Rs. 50,000 crore and Rs. 1 lakh crore, even with stronger equipment pricing. This figure remains below BHEL’s current market capitalisation.
The brokerage also pointed to BHEL’s past cash generation. It said the company generated about Rs. 7,100 crore in free cash flow between FY2007 and FY2026, compared with adjusted profit after tax of Rs. 38,300 crore during the period. “This calculation does not reflect any time value for revenues/profits, which can increase the ask further,” Kotak said.
NTPC shares fell about 13% over the past six months. Kotak linked much of the weakness to expectations of slower near-term earnings growth. Lower thermal capacity additions in recent months have also affected the outlook for the state-owned power producer.
At the same time, India continues to add renewable energy and storage capacity. Kotak said this expansion has created uncertainty around the pace of future thermal power development. Solar power paired with battery storage has also become more competitive in the electricity market.
Kotak’s reverse valuation analysis suggests that NTPC would need to add about 42 GW of thermal capacity over time. In comparison, the Central Electricity Authority expects India to add about 86 GW of thermal capacity between FY2027 and FY2036.
Private companies could account for part of that expansion. For example, the Adani Group has targeted approximately 4 GW of thermal capacity additions a year between FY2027 and FY2032. This means NTPC would not receive the entire future thermal opportunity.
Kotak expects India may add around 100 GW of new thermal power capacity over the longer term. The brokerage said rising solar generation and battery storage could limit the need for a much larger thermal buildout.
This creates different valuation questions for BHEL and NTPC. NTPC’s valuation reflects expectations for future power generation capacity, while BHEL’s valuation depends heavily on equipment orders and margins from thermal projects.
Kotak said it agrees that thermal generation and equipment assets have an uncertain long-term value. However, the brokerage believes BHEL’s current valuation assumes thermal capacity additions that appear higher than government projections.
The contrasting share price performance therefore comes as investors assess the pace of thermal additions, renewable energy growth and future earnings. While BHEL has sharply outperformed NTPC over the past six months, Kotak’s analysis shows that both valuations remain closely linked to India’s future power capacity mix.
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