Reiterate Buy on NTPC - Motilal Oswal

NTPC (NATP IN; Mkt Cap USD35.2b, CMP Rs191, Buy)

NTPC's management highlighted higher traction in various operating parameters. FY11 and FY12 are important milestones in NTPC's growth trajectory. This is because: (i) NTPC signed cumulative long-term PPAs for 70GW+ capacity, plans to reach 75GW+ by January 2011, (ii) the company aims to award BTG contracts of 30GW+ in the next one year (iii) the accelerated pace of capacity additions (a target to add 9GW in FY11-12 (iv) 650MW of merchant capacity will be operational in 4QFY11, mining operations will start in CY12, and (v) NTPC expects to get approval for the recovery of Rs60b in FY11-12 which will positively impact its cash flows.

We expect NTPC to deliver net earnings CAGR of 14% over FY10-14, led by 22% earnings CAGR in core generation profit. Reported RoE is expected to improve due to higher capitalization, especially in FY14 to 18.5%, up from an expected 13.6% in FY11.

We expect NTPC to post net profit of Rs88.4b in FY11 (down 5% YoY) and Rs102.8b in FY12 (up 16% YoY). The stock trades at a PER of 17.8x FY11E and 15.3x FY12E and P/BV of 2.3x FY11E and 2.2x FY12E. Reiterate Buy with a target price of Rs240, an upside of 26%.

Source : Equity Bulls

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