NTPC Green Energy Ltd is Rated Sell

Current Rating and Its Significance

MarketsMOJO’s 'Sell' rating for NTPC Green Energy Ltd indicates a cautious stance for investors, suggesting that the stock may underperform relative to the broader market or sector peers in the near to medium term. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company’s investment potential.

Quality Assessment

As of 31 January 2026, NTPC Green Energy Ltd holds an average quality grade. This reflects moderate operational and financial stability but highlights certain concerns. The company’s ability to generate returns on equity remains subdued, with an average Return on Equity (ROE) of just 3.24%. This low profitability per unit of shareholders’ funds suggests limited efficiency in deploying capital to generate earnings. Additionally, the company’s debt servicing capacity is weak, evidenced by a high Debt to EBITDA ratio of 10.18 times, indicating significant leverage and potential financial strain.

Valuation Perspective

The valuation grade for NTPC Green Energy Ltd is classified as very expensive. Despite the company’s Return on Capital Employed (ROCE) standing at a modest 3.1%, the stock trades at an elevated Enterprise Value to Capital Employed ratio of 2.3. This disparity suggests that the market price is not fully justified by the company’s capital efficiency or earnings potential. Investors should be wary of paying a premium for a stock with limited profitability and high leverage, as this may constrain future upside.

Financial Trend and Profitability

Financially, the company’s trend is flat, indicating stagnation rather than growth. The latest quarterly results ending December 2025 reveal a sharp decline in profitability, with Profit After Tax (PAT) falling by 88.5% to ₹17.48 crores compared to the previous four-quarter average. Interest expenses have surged to a quarterly high of ₹230.06 crores, further pressuring earnings. Profit Before Tax excluding other income (PBT less OI) has dropped to ₹5.74 crores, the lowest in recent quarters. Despite these challenges, the company’s profits have risen by 32% over the past year, a positive sign that contrasts with the stock’s negative price performance.

Technical Analysis

From a technical standpoint, NTPC Green Energy Ltd is currently bearish. The stock has experienced significant price declines across multiple time frames: a 6.59% drop in the last day, 8.02% over the past month, and a 24.31% decline over the last year. This downward momentum is reinforced by underperformance relative to the BSE500 index over the last three years, one year, and three months. The bearish technical grade signals continued selling pressure and weak investor sentiment, which may persist until there is a clear reversal in fundamentals or market conditions.

Stock Returns and Market Performance

As of 31 January 2026, NTPC Green Energy Ltd’s stock returns have been disappointing. The one-year return stands at -24.31%, with shorter-term returns also negative: -8.87% year-to-date, -18.67% over six months, and -17.54% over three months. These figures highlight the stock’s sustained underperformance and the challenges faced by the company in regaining investor confidence. The consistent negative returns underscore the rationale behind the 'Sell' rating, signalling that investors may want to consider alternative opportunities within the power sector or broader market.

Implications for Investors

For investors, the 'Sell' rating on NTPC Green Energy Ltd serves as a cautionary indicator. The combination of average quality, very expensive valuation, flat financial trends, and bearish technicals suggests limited near-term upside and elevated risk. Investors should carefully evaluate their exposure to this stock, considering the company’s high leverage, weak profitability, and recent earnings volatility. While the company operates in the power sector, which has long-term growth potential, current fundamentals and market sentiment do not favour a positive outlook for this stock.

Outlook and Considerations

Looking ahead, NTPC Green Energy Ltd will need to address its debt burden and improve operational efficiency to enhance profitability and justify its valuation. Any meaningful recovery in earnings or reduction in leverage could alter the investment thesis. Until then, the 'Sell' rating reflects a prudent approach for investors seeking to manage risk and optimise portfolio returns in a challenging market environment.

Company Profile and Market Capitalisation

NTPC Green Energy Ltd is classified as a midcap company operating within the power sector. The company’s focus on green energy aligns with broader industry trends towards sustainable power generation. However, despite the sector’s growth potential, NTPC Green Energy’s current financial and market metrics suggest it is facing headwinds that are reflected in its stock performance and rating.

Summary of Key Metrics as of 31 January 2026

The company’s Mojo Score stands at 30.0, corresponding to a 'Sell' grade, down from a previous 'Hold' rating with a score of 51 as of 03 Nov 2025. This 21-point decline in the Mojo Score encapsulates the deterioration in the company’s financial health and market sentiment. The stock’s recent price volatility, with a one-day decline of 6.59%, further emphasises the current bearish trend.

Conclusion

In conclusion, NTPC Green Energy Ltd’s 'Sell' rating by MarketsMOJO reflects a comprehensive assessment of its current financial and market position. Investors should interpret this rating as a signal to exercise caution, given the company’s high leverage, expensive valuation, flat financial trends, and bearish technical outlook. While the company’s green energy focus remains relevant, the present fundamentals and stock performance suggest limited near-term investment appeal.

Unlock special upgrade rates for a limited period. Start Saving Now →