Global brokerage CLSA has issued a strong recommendation for nhpc Ltd, projecting significant upside potential backed by capacity expansion and improving earnings visibility. The firm maintains a high conviction positive stance on the hydropower PSU, expecting 2026 to mark a turning point for the company's growth trajectory.

CLSA's Price Target and Investment Rationale

CLSA has set a price target of ₹117 for NHPC Ltd, representing a potential 41% upside from the stock's closing price of ₹83.00. The global firm maintains a "High Conviction" rating on the stock, with analysts suggesting the stock could potentially exceed this valuation.

Projected Financial Performance

CLSA expects 2026 to deliver exceptional financial performance for NHPC. The brokerage projects EPS growth of nearly 90%, driven by operating leverage, higher generation from new projects, and improving tariff visibility. This sharp earnings expansion is expected to strengthen profitability over the medium term.

The firm anticipates 2026 to be transformational in terms of scale, with installed capacity likely to expand approximately 64% year-on-year. This significant capacity addition is set to enhance generation capability, support revenue growth, and reinforce the company's long-term expansion strategy.

Key Growth Drivers and Project Pipeline

The full commissioning of NHPC's second-largest project, the Subansiri Lower Hydropower Project, is expected by the fourth quarter and represents a major growth catalyst. Once operational, this project will significantly boost generation capacity, improve revenue visibility, and enhance earnings to support medium to long-term growth prospects.

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

Company Profile and Current Operations

NHPC Limited operates as a Navratna public sector undertaking and serves as the Government of India's leading hydroelectric power company. The company's core business encompasses generation and sale of bulk power to multiple utilities across the country, while also providing project management, construction and consultancy services, and participating in power trading activities.

As of Q3 FY25, NHPC maintains an installed capacity of 7,233 MW, including hydro and renewable sources. The company stands as one of India's largest hydropower producers, operating 6,971 MW of hydropower capacity representing approximately 15% of the country's total hydropower generation. NHPC operates 28 power stations strategically located across 15 states and 2 union territories.

Recent Financial Performance

NHPC's latest quarterly results demonstrate solid operational performance. Revenue from operations grew 10.20% to ₹3,365.00 crore compared to the corresponding quarter in the previous financial year. Net profit showed stronger momentum with 15% growth to ₹1,219.00 crore, resulting in EPS growth to ₹1.02 per share in Q2 FY26.

The company maintains an attractive dividend payout ratio of 64%, reflecting its commitment to shareholder returns. NHPC's shares have delivered substantial returns over the long term, providing 232% returns over the last five years, demonstrating the stock's strong performance track record in the hydropower sector.

NHPC shares are likely to remain on investors' radar after CLSA issued a 'high-conviction outperform' call on the stock, citing a sharp step-up in capacity and decisive improvement in earnings visibility from FY26. The brokerage has set a target price of ₹117.00 per share, implying an upside of over 42% from Thursday's closing level of ₹82.00.

Capacity Expansion to Drive Growth

At the heart of CLSA's bullish view is its expectation that FY26 will mark an inflection point for NHPC's scale and growth trajectory. The brokerage believes the company's installed capacity could rise by as much as 64% year-on-year in FY26, setting the stage for a stronger earnings profile over the medium term.

CLSA expects this expansion phase to translate into a sharp improvement in profitability, projecting nearly 90% growth in earnings per share over FY25-27. The brokerage added that FY26 should solidify NHPC's decadal growth story as long-pending projects begin contributing meaningfully.

Corporate Actions Strengthen Financial Position

Recent corporate actions have added to investor interest in the stock. NHPC's board has approved fund-raising of up to ₹2,000.00 crore through the issuance of non-convertible, non-cumulative AH-Series bonds in one or more tranches via private placement, as part of its FY26 borrowing plan.

The move is seen as strengthening the company's financial flexibility ahead of a heavy execution phase and has been one of the triggers behind recent activity in the stock.

Key Operational Catalysts

A key operational catalyst highlighted by CLSA is the full commissioning of the Subansiri Lower Hydro Project—NHPC's second-largest project—by the fourth quarter of FY26. Beyond this, the brokerage expects the award of four hydropower projects and one pumped storage project during 2026, which could further strengthen visibility on long-term growth.

Stock Performance and Market Position

NHPC's recent stock performance has been relatively muted, up about 5% over the past year compared with a roughly 10% rise in the Nifty 50. However, CLSA sees NHPC as a scale-up and execution-led opportunity, positioning the company for significant growth as capacity expansion materializes and earnings visibility improves.