1. Maintain buy on NTPC with target of Rs 157

Maintain buy on NTPC with target of Rs 157

Maintain ‘buy’ on NTPC and target price of Rs 157 per share, valuing the stock at FY16f P/B of 1.4x.

Published: January 15, 2015 12:57 AM

Maintain ‘buy’ on NTPC and target price of R157 per share, valuing the stock at FY16f P/B of 1.4x. We maintain that NTPC would be able to achieve a 17%-plus operating Return on Regulated Equity (RoRE) under the new tariff regulations. At the current market price, the stock trades at FY16f 1.2x P/B and 12.7x P/E.

Indicative coal fired PLF/PAF for Q3FY15 is 81% and 93% Coal-fired PLF for nine months of FY15 was 78%. Notably, four out of 16 coal-fired projects aggregating 8.6 GW capacity operated at a PLF of less than 85%; electricity generation in excess of 85% PLF was 1277 MUs, implying incentive-linked income at R6130 crore. While a sequential uptick in coal-fired PAF/PLF for Q3FY15 is on expected lines, a 1.6% and 3.1% y-o-y decline in PLF and PAF for the quarter is a bit disappointing. Going forward, the PAF/PLF for Barh-II and Mauda would be worth monitoring.

As per latest available data from the Central Electricity Authority (CEA), the tentative monthly generation report for December 2014 – utilisation level (PLF) of NTPC’s overall wholly-owned capacity stood at 75.5% (down 50 bps m-o-m and 660 bps y-o-y). For December 2014, NTPC’s wholly-owned coal-fired PLF stood at 81.4%. Typically, NTPC witnessed a sequential pick-up in PLF in December. However, this time around, overall PLF remained flat.

Nomura

Tags: NTPC
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