NHPC Ltd is Rated Strong Sell

Rating Context and Current Position

On 04 February 2026, MarketsMOJO revised NHPC Ltd’s rating from 'Sell' to 'Strong Sell', reflecting a significant deterioration in the company’s overall assessment. The Mojo Score dropped by 8 points, moving from 35 to 27, signalling heightened concerns about the stock’s prospects. This rating encapsulates a comprehensive evaluation of NHPC’s quality, valuation, financial trend, and technical outlook.

It is important to note that while the rating change occurred on 04 February 2026, all financial data, returns, and fundamental metrics referenced in this article are current as of 07 February 2026. This ensures investors receive the most up-to-date information to inform their decisions.

Quality Assessment

As of 07 February 2026, NHPC Ltd’s quality grade is assessed as average. The company’s ability to generate returns on equity remains modest, with an average Return on Equity (ROE) of 9.11%. This indicates relatively low profitability per unit of shareholders’ funds, which is a concern for investors seeking robust earnings growth. Additionally, the company’s capacity to service its debt is limited, as evidenced by a high Debt to EBITDA ratio of 5.14 times. This elevated leverage ratio suggests financial strain and potential vulnerability to interest rate fluctuations or operational setbacks.

Valuation Considerations

NHPC Ltd is currently rated as very expensive in terms of valuation. The stock trades at a premium with an Enterprise Value to Capital Employed (EV/CE) ratio of 1.5, which is high relative to its sector peers. Despite this, the stock price is somewhat discounted compared to the historical average valuations of its peer group. The company’s Price/Earnings to Growth (PEG) ratio stands at 1.5, reflecting a valuation that is not fully justified by its earnings growth prospects. Investors should be cautious, as the elevated valuation may not be supported by the company’s underlying financial performance.

Financial Trend Analysis

The financial trend for NHPC Ltd is negative as of 07 February 2026. Over the past five years, the company’s operating profit has declined at an annualised rate of -3.03%, signalling challenges in sustaining growth. The latest half-year results reveal further concerns: operating profit was flat in September 2025 and turned negative in December 2025. Interest expenses have surged by 136.40% to ₹587.94 crores in the latest six months, reflecting increased borrowing costs or higher debt levels. The Return on Capital Employed (ROCE) has dropped to a low 6.50%, while the debt-to-equity ratio has risen to 1.09 times, the highest in recent periods. These indicators collectively point to deteriorating financial health and pressure on profitability.

Technical Outlook

The technical grade for NHPC Ltd is mildly bearish as of 07 February 2026. The stock has experienced mixed short-term price movements, with a one-day decline of -0.69% and a one-month drop of -4.90%. Over the past three and six months, the stock has fallen by 4.14% and 5.44% respectively. However, the year-to-date return is a modest +0.34%, and the one-year return stands at +2.29%. These figures suggest limited momentum and a cautious market sentiment towards the stock. The mildly bearish technical signals reinforce the need for investors to approach NHPC Ltd with prudence.

What the Strong Sell Rating Means for Investors

A 'Strong Sell' rating from MarketsMOJO indicates that the stock is expected to underperform the broader market and its sector peers in the near to medium term. For investors, this rating serves as a cautionary signal to reassess exposure to NHPC Ltd, particularly given the company’s stretched valuation, weakening financial trends, and subdued technical indicators. The rating suggests that the risks associated with holding the stock currently outweigh the potential rewards, and investors may consider reducing their positions or avoiding new investments until there is a clear improvement in fundamentals.

Summary of Key Metrics as of 07 February 2026

• Mojo Score: 27.0 (Strong Sell)
• Debt to EBITDA Ratio: 5.14 times
• Return on Equity (avg): 9.11%
• Operating Profit Growth (5 years): -3.03% annualised
• Interest Expense (latest 6 months): ₹587.94 crores, +136.40% growth
• ROCE (Half Year): 6.50%
• Debt to Equity Ratio (Half Year): 1.09 times
• Enterprise Value to Capital Employed: 1.5
• PEG Ratio: 1.5
• Stock Returns: 1D -0.69%, 1W +1.57%, 1M -4.90%, 3M -4.14%, 6M -5.44%, YTD +0.34%, 1Y +2.29%

Sector and Market Context

NHPC Ltd operates within the power sector, a space that has faced considerable challenges in recent years, including regulatory pressures, fluctuating demand, and rising input costs. The company’s midcap status places it in a competitive position, but its financial and operational difficulties have hindered its ability to capitalise on sector opportunities. Compared to broader market indices and sector benchmarks, NHPC’s performance has been subdued, with returns lagging behind more resilient power companies.

Investor Takeaway

For investors, the current 'Strong Sell' rating on NHPC Ltd signals a need for caution. The combination of average quality, very expensive valuation, negative financial trends, and mildly bearish technicals suggests that the stock is not favourably positioned for near-term gains. Those holding the stock should carefully evaluate their risk tolerance and consider portfolio diversification to mitigate potential downside. Prospective investors might prefer to monitor the company’s financial recovery and valuation adjustments before initiating new positions.

Outlook and Monitoring

Going forward, key indicators to watch include improvements in operating profit growth, reduction in debt levels, and stabilisation of interest expenses. A turnaround in ROCE and a more attractive valuation relative to peers would also be positive signals. Until such developments materialise, the 'Strong Sell' rating remains a prudent reflection of NHPC Ltd’s current investment risk profile.

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