Buy NTPC; target of Rs 190: Fortune Interfinance

Fortune Interfinance is bullish on NTPC and has recommended buy rating on the stock with a target of Rs 190 in its May 14, 2012 research report.

“NTPC, the public sector power generation giant has turned in a revenue growth of mere 5% to Rs16,361.85 crore for the quarter ended March 2012 but 180bps expansion in operating margin to 25.7% led to 13% growth at operating level to Rs4,210.69 crore. Eventually the net profit was lower by 7% to Rs2,593.44 crore due to sharp increase in tax rate as higher interest expenses was more or less compensated by muted increase in depreciation charges. Net sales net of electricity duty was higher by 5% to Rs16,263.56 crore. The other operating income for the quarter has jumped by 28% to Rs97.95 crore. Total sales also include advance against depreciation recognized as prior period sales of Rs0.34 crore against Rs1.91 crore in the corresponding period.”

“Expansion in operating margin was largely on account of decline in other operating expenses by 428bps to 5% of sales despite increase in fuel costs, which as a proportion to sales was higher by 147 bps to 63.8% and staff costs by 94bps to 5.5%. Other income was higher by 13% to Rs669.97 crore. The interest cost was up 35% to Rs487 crore. PBDT was thus higher by 11% to Rs4,393.66 crore. However, the depreciation was higher by muted 5% to Rs736.26 crore. Thus, the PBT grew by 12% to Rs3657.4 crore. Moreover the provision for taxation was up by 124% to Rs1,063.96 crore at effective tax rate of 29.1% against 14.6% and thus de-growth at net profit level was 7% to Rs2,593.44 crore. NTPC- which currently has 36,000MW capacity- has 17,000MW capacity under construction. We at FIFL are of the view that, at the current CMP of Rs 148 the stock is trading at 10x FY13E EPS of 13.8 and at 9x FY14E EPS of 16.3. At the target price of Rs 190 the stock is trading at 14x on FY13E and 12x FY14E earnings,” says Fortune Interfinance research report.

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