Buy NTPC; target of Rs 199: Emkay

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Buy NTPC; target of Rs 199: Emkay

Emkay Global Financial Services is bullish on NTPC and has recommended buy rating on the stock with a target price of Rs 199 in its January 31, 2012 research report.

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Emkay Global Financial Services is bullish on NTPC and has recommended buy rating on the stock with a target price of Rs 199 in its January 31, 2012 research report.

"NTPC, 3Q12 PAT of Rs21.3bn is below est. due to higher R&M exp (preponed from 4Q - will get offset). APAT stood at Rs21.6bn (adj. for previous yr sales, int. from beneficiaries and prov.). Has commissioned 1820MW (Sipat + Jhajjar), commercialized 1,160MW in YTD12. Mgmt has retained its capacity addition target with upward bias to 4980MW from 4320MW. PAF of coal plants at 85.3% and 86.2% for 3Q12 and 9M12. Though 4Q PAF to be significantly higher, we revise FY12E PAF to 88.5% (90% earlier). We also reduce COD target from 2820MW to 2320MW - cut earnings by 3-4%. Though PAF structurally coming down, but do not see it lower than 88%. Core ROE still remain ~25%."

"NTPC's 3Q12 PAT of Rs21.3bn against our estimates of Rs22.6bn, lower by 10% yoy and 12% QoQ, due to under recovery on water charges and higher maintenance expenses. NTPC has pre-pone the plants maintenance to 3Q12 which resulted into incremental R&M expenses of Rs1.5bn. Adjusting for one offs ((adj. for previous yr sales, int. from beneficiaries and prov.), APAT stood at Rs21.6bn. Gross generation during the qtr has increased by 3% yoy to 56.4BU driven by 1660MW of commercialized capacity addition since 3Q11. Revenues stood at Rs153.3bn, up 14% yoy primarily driven by realizations (Rs3.02/unit), up 20% yoy. Increase in fuel cost (up 26% yoy on per unit basis) has largely contributed to better realizations during the quarter."

"Though PAF structurally coming down, but do not see it lower than 88% (expect 4Q PAF to be significantly higher at around 94%). Core ROE still remain at ~25%. We also highlight that none of the SEBs have delayed payments to NTPC beyond 60days and delays up to 60days is a positive for NTPC (earns late payment surcharge). Maintain Buy on reasonable valuations at 1.8x (prices in negatives - fuel, SEB delays etc) with revised price target of Rs 199/Share. Further, scenario of interest rates coming down is a positive for the stock as regulated utilities are quasi bonds," says Emkay Global Financial Services research report.

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To read the full report click on the attachment