Over the past six months, two of India’s state-owned power giants have moved in strikingly different directions. BHEL shares surged approximately 63%, while NTPC shares declined by around 13%. According to Kotak Institutional Equities, this divergence stems from contrasting market expectations regarding thermal power capacity additions, renewable energy growth, and future earnings potential.
BHEL’s Rally Raises Valuation Concerns
Kotak Institutional Equities noted that BHEL’s impressive share price performance suggests investors anticipate sustained demand for thermal power equipment. However, the brokerage cautioned that the company’s current market valuation—around Rs. 1.48 trillion—implies a much larger thermal capacity buildout than government estimates support.
Kotak’s analysis indicates that BHEL would need to execute between 150 GW and 300 GW of boiler, turbine, and generator capacity over its lifetime to justify its valuation. Even when assigning 25% of BHEL’s value to non-thermal businesses, the required execution remains demanding.
“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 stated.
The brokerage also assessed the potential profit pool from future thermal equipment orders, estimating it could range between Rs. 50,000 crore and Rs. 1 lakh crore—even with stronger equipment pricing. This figure falls short of BHEL’s current market capitalization.
Additionally, Kotak highlighted BHEL’s historical cash generation, noting that the company produced approximately 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 same period. “This calculation does not reflect any time value for revenues/profits, which can increase the ask further,” the brokerage added.
NTPC’s Decline Linked to Slower Thermal Growth
NTPC shares fell about 13% over the past six months, with Kotak attributing much of the weakness to expectations of slower near-term earnings growth. Reduced thermal capacity additions in recent months have also weighed on the outlook for the state-owned power producer.
Meanwhile, India continues to expand its renewable energy and storage capacity. Kotak said this growth has introduced uncertainty regarding the pace of future thermal power development, as solar power paired with battery storage becomes increasingly competitive in the electricity market.
Kotak’s reverse valuation analysis suggests NTPC would need to add approximately 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 players could capture a portion of that expansion. For instance, the Adani Group has targeted roughly 4 GW of thermal capacity additions annually between FY2027 and FY2032, meaning NTPC would not receive the entire future thermal opportunity.
Renewable Expansion Shapes the Outlook
Kotak anticipates India may add around 100 GW of new thermal power capacity over the longer term. The brokerage noted that rising solar generation and battery storage could limit the need for a much larger thermal buildout.
This scenario creates distinct valuation questions for BHEL and NTPC. NTPC’s valuation reflects expectations for future power generation capacity, while BHEL’s valuation hinges on equipment orders and margins from thermal projects.
Kotak acknowledged that thermal generation and equipment assets carry 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 underscores the market’s assessment of thermal additions, renewable energy growth, and future earnings. While BHEL has sharply outperformed NTPC over the past six months, Kotak’s analysis reveals that both valuations remain closely tied to India’s evolving power capacity mix.