Stock Target: PSU stock with up to 40% upside potential

Synopsis: CLSA sees 41 percent upside in a hydropower PSU stock, citing sharp capacity growth, strong earnings expansion, key project commissioning, and fresh hydro and pumped storage project awards.

A hydropower PSU stock is in focus after global brokerage CLSA gave strong upside potential, backed by a sharp expansion in capacity and improving earnings visibility. The firm has maintained a high-conviction positive stance on the stock.

CLSA believes 2026 could mark a turning point, with installed capacity set to rise meaningfully and earnings growth accelerating over the next few years. Key project milestones, tariff clarity, and fresh project awards are expected to strengthen the company’s long-term growth trajectory.

With a market capitalization of Rs 83,574 crore, NHPC Ltd’s shares on Monday made a day high of Rs 82.98 per share, up by 0.6 percent from its previous day’s close price of Rs 82.44 per share. The shares gave a return of 232 percent over the last five years.

Target & Rationale

The global firm maintains a “High Conviction” rating on the stock, setting a price target of Rs 117. This represents a potential 41 percent upside from Monday’s closing price of Rs 83, with analysts suggesting the stock could even exceed this valuation.

The company’s growth ahead: CLSA believes 2026 could be a strong earnings year for the company, with EPS projected to grow nearly 90 percent. The sharp rise is expected to be driven by operating leverage, higher generation from new projects, and improving tariff visibility, strengthening profitability over the medium term.

The brokerage also expects 2026 to be transformational in terms of scale, with installed capacity likely to expand about 64 percent year-on-year. This significant addition is set to enhance generation capacity, support revenue growth, and reinforce the company’s long-term expansion story.

Project orders: The full commissioning of its second-largest project, the Subansiri Lower Hydropower Project, expected by the fourth quarter, is a key growth driver. Once operational, the project will significantly boost generation capacity, improve revenue visibility, and enhance earnings, supporting the company’s medium- to long-term growth outlook.

The company is likely to secure four hydropower projects and one pumped storage project in 2026, which could significantly enhance capacity addition plans. These awards are expected to improve earnings visibility, strengthen the project pipeline, and support long-term growth prospects well into the next decade.

About the company

NHPC Limited is a Navratna public sector undertaking and the Government of India’s leading hydroelectric power company. Its core business is the generation and sale of bulk power to multiple utilities across the country. Beyond this, the company provides project management, construction and consultancy services, and also participates in power trading.

Power Capacity: As of Q3 FY25, the company has an installed capacity of 7,233 MW, including hydro and renewables. It is one of India’s largest hydropower producers, with 6,971 MW of hydropower (~15 percent of the country’s total). It operates 28 power stations across 15 states and 2 UTs.

Financial Highlights: revenue from operations grew by 10.2 percent to Rs 3,365 crore, corresponding to the same quarter in the last financial year. Accompanied by a 15 percent growth to Rs 1,219 crore, resulting in an EPS growth to Rs 1.02 per share in Q2 FY26. With an outstanding dividend payout ratio of 64 percent.

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