Hold NTPC; target of Rs 178: ICICIdirect.com

ICICIdirect.com has recommended hold rating on NTPC with a target of Rs 178 in its October 29, 2012 research report.

“NTPC, as usual Q2FY13 reported revenues and PAT at |16351 crore and Rs 3142 crore, respectively came in higher than estimates owing to many one offs relating to accounting. Adjusted PAT came in at Rs 2047 crore. Other income was higher than estimates on account interest income on deposits and higher dividends from J.V.s & Subsidiaries. Capacity adds during Q2FY13 was nil. Gross electricity generation growth of 3.6% YoY and 10% QoQ decline at 52.72 billion units (BU’s) was mainly owing to planned shutdown of capacity. As a result there was contraction of 350 bps and 310 bps QoQ in Coal plant and gas plant PLF’s, respectively in Q2FY13. However, as per management, PLF’s have started showing up tick from October 2012. NTPC has commercialised capacity to the tune 2820 MW in H1FY13. Realisation per unit for Q2FY13 stood at Rs 3.05/Kwhr.”

“NTPC’s capacity addition in 12th Plan is front loaded. The company expects to commission as much as 50% of 12th plan target over FY13- FY14E. We believe NTPC is on track to achieve the same as it has commissioned 15% of the target in H1FY13. If the capacity adds plans pan out accordingly then rate of capitalisation would surprise on the upside. However, we expect NTPC to commission ~3670 MW in FY13E (88% of the planned target in FY13E).”

“We expect CWIP as % of Networth to gradually decline to 49% and 46% in FY13E and FY14E, implying a higher capitalisation intensity in the balance sheet. Given the rate of capacity adds in H1FY13, we believe that NTPC will be able increase the rate of gross block addition from existing CWIP. Coupled with this NTPC is one of safest utility to take shelter under (Regulated Model/Lesser fuel risk/Underleveraged balance sheet) when power sector is facing challenging times. Though we value NTPC at 1.8x its FY14E book value, markets will wait to see the run rate of capacity addition before re-rating sets in. Maintain Hold with a target price of Rs178 (from Rs 171 earlier),” says ICICIdirect.com research report.

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