Buy NTPC; target of Rs 157: Edelweiss

NTPC’s Q4FY16 regulated earnings of INR 26bn moved up 6.7% YoY and surpassed our estimates led by better incentives and higher dividend income from subsidiaries. Going forward, NTPC would be one of the biggest beneficiaries of the recent spurt in all‐India power demand (April PLF up >420bps), which could enhance plant load factor (PLF) and in turn RoE. Debtors have risen by 8 days, but as seen in past this could correct in due course. However, the challenge could be more of understanding the contours of investments, if at all, in fertilizer plants which could result in the company being viewed as a conglomerate rather than a pure utility firm.

We estimate regulated equity to rise by 12%, and earnings to clock 9% CAGR over FY16‐18. At CMP, the stock is trading at 1.2x FY18E P/BV, which seems reasonable. Maintain ‘BUY/SP’ with our SOTP‐based target price of INR 157. One per cent increase in RoE will result in upward revision in target price by 5%.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.