NTPC LTD - PINC Result Review

NTPC's Q1 FY11 results were below our expectations with PAT de-growing 16% YoY to Rs18.4bn. Despite higher capacity over the corresponding period, generation remained flat at 55.7 BU - due to unscheduled shutdown at some of its plants. Average realisation improved to Rs2.48/unit - higher by 7.7% YoY - translated into 8% YoY revenue growth to Rs129bn.

• No capacity addition during the quarter
• Marginal dip in PLF, Gas units continue with robust performance
• CEA estimates 2.5GW addition in FY11 against NTPC's 4.2GW

VALUATIONS AND RECOMMENDATION

NTPC currently trades at P/BV of 2.7x FY10E and 2.5x FY11E. We build in an addition of 5.5GW over FY11E and FY12E, in line with CEA's estimate. We value the company at 2.5x FY11E book to arrive at our target price of Rs203/share. Key trigger for the stock will be accelerated capacity addition over the next two years. We maintain 'HOLD' recommendation on the stock.

Source : Equity Bulls

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