CERC regulations are neutral, maintain reduce
REDUCE
CMP: Rs216 Target Price: Rs187
NTPC reported net profit of Rs21.9bn, up 27% yoy and significantly above our estimate of Rs19.2bn. As per our assessment the higher than expected net profit was driven by (1) higher other income, (2) higher UI charges - attributed to huge power shortage during the quarter and consequently lower frequency of the grid and (3) higher plant availability of 93% - attributed to lower planned maintenance and higher availability of gas. Though NTPC has reported strong performance during Q1FY10 but we believe it is mainly driven by unsustainable factors (other income, UI and PAF). Therefore we view this as an aberration. We reiterate that new CERC regulations are neutral to NTPC's earnings (confirmed by the management in the analyst meet). We maintain our earnings estimates of Rs10.4, Rs11.4 and Rs12.5 for FY10E, FY11E and FY12E respectively. We believe that NTPC's valuations are directly linked with 10-yr Treasury bond yields currently at 7%. The current valuations are factoring in 310 bps improvement in its reported ROE. With reported ROE not expected to improve during next 3-4 years at least we do not see any re-rating triggers. At CMP of Rs216, stock is trading at 2.8x FY10E Book Value and 20.6x FY10E earnings. We maintain 'REDUCE' rating on the stock and SoTP based target price of Rs187/Share.
--~--~---------~--~----~------------~-------~--~----~
Safe Harbor:
The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
You received this message because you are subscribed to the Google Groups "Investors Please Listen !" group.
To post to this group, send email to investorspleaselisten@googlegroups.com
To unsubscribe from this group, send email to
investorspleaselisten+unsubscribe@googlegroups.com For more options, visit this group at http://groups.google.com/group/investorspleaselisten?hl=en
-~----------~----~----~----~------~----~------~--~---
No comments:
Post a Comment