Tuesday, February 2, 2010

NTPC Hold on underperformance; HOLD; Target: Rs 204

NTPC

 

In Line, Upgrade to Hold on underperformance


HOLD

 

CMP: Rs 208                                  Target Price: Rs 204


NTPC reported net profit of Rs23.7bn (up 5% yoy), in line with our estimate. The revenues grew by 5% yoy driven by 4% growth in volumes & 1% growth in realizations. The revenues were below our estimate, attributed to lower fuel prices & in turn lower recovery in revenues. The EBITDA stood at Rs33.6bn, up 28% mainly due to the fact that Q3FY09 revenues does not include the recovery of tax which was accounted for below PBT. For 9mFY10, NTPC's adjusted EPS stood at Rs7.8/Share. This implies an adjusted earnings growth of 6% yoy in Q4FY10E. We maintain our earnings estimates of Rs10.5, Rs11.5 and Rs12.6 for FY10E, FY11E and FY12E respectively. Our estimates do not factor in any upside from merchant sale out of unallocated quota of central Govt. as we do not expect significant upside. At CMP of Rs208, the stock is trading at 2.5x FY11E Book Value and 18.1x FY11E earnings. During past 12 months, the stock has underperformed the Sensex by 36% and is currently very near to our target price. We upgrade the stock to 'Hold' rating and maintain SoTP based target price of Rs204/Share.  

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