Brokerage house Motilal Oswal is bullish on NTPC and has recommended buy rating on the stock with a target price of Rs 177, in its research report.
NTPC reported revenues of INR187.4b, flat YoY and largely in-line with our estimate of INR184b. While revenue growth looked muted owing to higher base and impact of new regulation, the key highlight of the performance was strong EBIDTA at INR45.4b (though down 2% YoY), 25% higher than our estimate. This is also credible given lower profitability in 1HFY15 owing to new regulation. Net profit stood at INR31b, vs estimate of INR20b though partly aided by one-offs.
NTPC booked prior period revenues of INR1.2b (above EBIDTA) and tax refund of INR6.5b (below PBT) for the quarter. Recurring EBIDTA stood at INR44b, as number of projects with fixed charge under recovery (linked to availability) came down from 5 to 2 in 9MFY15. Recurring PAT stood at INR23b, 14% higher than estimate despite other income at INR6b was lower than our estimate of INR7b. Higher fixed charge recovery rather than incentive contributed to better performance, in our view, as generation/PLF was muted.
For 3QFY15, generation stood at 61.3BUs (up 4% YoY), vs est of 60.5BUs and sales stood at 57.2BUs (up 3.5% YoY), vs estimate of 53.2BUs. Coal and Gas project PLFs too were in-line with estimate at 81% (160bps lower YoY) and 32% (200bps lower), respectively. Capacity addition is near NIL, while FY15E addition target is 1.8GW.
"NTPC is our top-pick given relatively robust business model, strong cashflow/low leverage, beneficiary of improved demand/generation and comfort on valuation. We upgrade our FY15/16E estimate by 9% / 5% and expect net profit of INR88b in FY15E (down 11% YoY) and INR94b in FY16E (up 7% YoY). Stock trades at PER of 11x and P/BV of 1.3x (RoE 12%) on FY17E basis. Bonus debenture, dividend payout provides comfort. Buy NTPC for the target price of Rs 177", says Motilal Oswal research report.
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