Current Rating and Its Significance
MarketsMOJO’s 'Sell' rating for NHPC Ltd indicates a cautious stance for investors considering this stock. This recommendation is based on a comprehensive evaluation of the company’s quality, valuation, financial trend, and technical indicators. The rating suggests that, given the current data, the stock may underperform relative to the broader market or its sector peers, and investors should carefully weigh the risks before committing capital.
Background on Rating Update
The rating was revised to 'Sell' on 11 Nov 2025, reflecting a significant shift in the company’s outlook at that time. The Mojo Score, a composite measure of various performance and risk factors, dropped by 22 points from 57 to 35, signalling a marked deterioration in the stock’s attractiveness. Despite this date marking the rating change, all financial data and returns referenced here are current as of 05 January 2026, ensuring that the analysis is relevant to today’s market conditions.
Here’s How NHPC Ltd Looks Today
As of 05 January 2026, NHPC Ltd’s stock performance has been mixed. The stock gained 0.48% on the day, with a one-week return of 9.49% and a one-month return of 8.98%. However, over the past three months, the stock declined by 3.33%, and the six-month return is slightly negative at -1.19%. Year-to-date, the stock has appreciated by 6.14%, while the one-year return stands at a modest 1.17%. These figures suggest some short-term momentum but limited long-term growth.
Quality Assessment
The company’s quality grade is assessed as average. NHPC Ltd exhibits a low ability to service its debt, with a high Debt to EBITDA ratio of 5.14 times, indicating significant leverage and potential financial strain. The average Return on Equity (ROE) is 9.11%, which is relatively low and points to limited profitability per unit of shareholder funds. Additionally, the company’s net sales and operating profit have grown at annual rates of only 2.30% and 2.93% respectively over the last five years, reflecting sluggish long-term growth. The half-year results ending September 2025 were flat, with a Return on Capital Employed (ROCE) at a low 6.50% and a debt-to-equity ratio of 1.09 times, the highest in recent periods.
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- - Fundamental Analysis
- - Technical Signals
- - Peer Comparison
Valuation Perspective
NHPC Ltd’s valuation is considered very expensive. The company’s ROCE of 5.4% is low relative to its cost of capital, and it trades at an enterprise value to capital employed ratio of 1.5 times. While the stock is priced at a discount compared to its peers’ average historical valuations, this discount does not fully compensate for the company’s weak profitability and growth prospects. The price-to-earnings-to-growth (PEG) ratio stands at 3.6, signalling that the stock’s price is high relative to its earnings growth, which may deter value-focused investors.
Financial Trend Analysis
The financial trend for NHPC Ltd is flat, indicating little improvement or deterioration in key financial metrics over recent periods. The company’s net sales and operating profit growth rates have remained subdued, and the flat half-year results reinforce the lack of momentum in earnings. The high leverage and low returns on capital further constrain the company’s ability to generate sustainable growth and shareholder value.
Technical Outlook
From a technical standpoint, NHPC Ltd is mildly bearish. Despite some short-term gains, the stock’s three-month and six-month returns are negative, reflecting underlying weakness in price momentum. The mild bearish technical grade suggests that the stock may face resistance in breaking out to higher levels without a significant change in fundamentals or market sentiment.
Implications for Investors
For investors, the 'Sell' rating on NHPC Ltd signals caution. The combination of average quality, very expensive valuation, flat financial trends, and mildly bearish technicals suggests that the stock may not offer attractive risk-adjusted returns in the near term. Investors should consider these factors carefully and may prefer to explore alternative opportunities within the power sector or broader market that demonstrate stronger fundamentals and more favourable valuations.
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Summary
In summary, NHPC Ltd’s current 'Sell' rating by MarketsMOJO reflects a comprehensive assessment of its financial health and market position as of 05 January 2026. The company’s average quality, very expensive valuation, flat financial trends, and mildly bearish technical outlook collectively suggest limited upside potential and elevated risks. Investors should approach this stock with caution and consider their portfolio objectives and risk tolerance before investing.
Company Profile Snapshot
NHPC Ltd is a midcap company operating in the power sector. Despite its established presence, the company faces challenges in growth and profitability, as evidenced by its financial metrics and market performance. The stock’s modest returns over the past year and subdued earnings growth highlight the need for investors to carefully evaluate its prospects in the context of sector dynamics and broader economic conditions.
Stock Returns Overview (As of 05 January 2026)
The stock’s recent returns show a mixed picture: a 0.48% gain on the latest trading day, a strong 9.49% increase over one week, and an 8.98% rise over one month. However, the three-month and six-month returns are negative at -3.33% and -1.19% respectively. The year-to-date return is a positive 6.14%, while the one-year return is a modest 1.17%. These figures indicate some short-term strength but limited longer-term momentum.
Debt and Profitability Metrics
NHPC Ltd’s high Debt to EBITDA ratio of 5.14 times raises concerns about its ability to service debt efficiently. The company’s average Return on Equity of 9.11% and low ROCE of 5.4% further underscore challenges in generating adequate returns for shareholders. The elevated debt-to-equity ratio of 1.09 times as of the half-year period ending September 2025 adds to the financial risk profile.
Growth Trends
Long-term growth remains subdued, with net sales increasing at an annual rate of 2.30% and operating profit growing at 2.93% over the past five years. The flat half-year results in September 2025 reinforce the lack of significant earnings momentum, which is a key consideration for investors seeking growth-oriented stocks.
Valuation Considerations
Despite trading at a discount relative to peers’ historical valuations, NHPC Ltd’s valuation remains very expensive when considering its low returns and growth prospects. The enterprise value to capital employed ratio of 1.5 times and a PEG ratio of 3.6 suggest that the stock’s price may not be justified by its earnings growth trajectory.
Technical Signals
The mildly bearish technical grade reflects recent price weakness over intermediate time frames, despite some short-term gains. This technical outlook suggests that the stock may face resistance in sustaining upward momentum without improvements in fundamentals or broader market sentiment.
Investor Takeaway
Overall, NHPC Ltd’s 'Sell' rating advises investors to exercise caution. The company’s financial and market indicators point to limited upside and elevated risks. Investors should consider these factors carefully and may wish to prioritise stocks with stronger fundamentals and more attractive valuations within the power sector or other industries.
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