Maintain 'buy' on NTPC – TP reduced to Rs.190 - Geojit BNP Paribas Financial Services

- Buy rating on NTPC is maintained with a lower target price of Rs.190 from the earlier target price of Rs.206. Target price is lowered due to cut in expected earnings for FY12 and FY13.

- The stock underperformed MSCI India index over the last one year on concerns of coal shortages, delays in new capacity additions and disappointing earnings due to delays in regulatory approvals to pass on rising operating approvals.

- However, buy rating on the stock is retained considering attractive valuation of the stock, strong balance sheet and decent dividend yield.

- Earnings estimates for FY12 has been cut 7.2% and 9.2% for FY13 on expectation of delays in capacity additions and the absence of any significant improvement in domestic coal supplies.

- Upside for the stock is expected when NTPC's own coal mines starting production and improvement in the domestic supply of coal.

- Approvals to pass through higher operating expenses incurred in the past two years will also be positive on the stock.

- At the current price of the stock at 141 range, the stock is traded below its replacement cost and at the trough of its one year forward P/E.

- Maintain buy with a target price of Rs.190 over one year. Delay in capacity additions and domestic coal shortages are risks to the target price.

Source : Equity Bulls

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