NTPC: (Neutral; 12-month TP: Rs205) : : Goldman Sachs,

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NTPC: (NTPC.BO; Neutral; 12-month TP: Rs205, potential upside 0.5%)
We believe NTPC is least impacted by the increase in competition and rising fuel costs as it
operates on the fuel pass through mechanism.
 With 49,534MW of capacity under operation and construction and NTPC planning
to enter into PPA’s for about 15000MW before January 2011, we believe NTPC will
have a total of about 60,000-65,000MW of capacity — all of which is likely to
operate on fuel pass through mechanism.
 Despite the defensiveness of its earnings, we believe NTPC’s earnings growth will
primarily be driven by execution of capacity under construction and development.
NTPC is yet to demonstrate its ability to commission the projects as per the
schedule. We expect NTPC to add about 2,650MW for FY11 vs its estimate of about
4,150MW on account of delays to its projects at Farakka and Sipat. We now expect
these projects to commission only in FY12E.
 The cash returns of the company improve at a steady pace, but lag its peers
particularly in the private sector.
 NTPC is currently trading at mid cycle multiples. We roll forward our target price to
FY12E and our revised target price of Rs205 (from Rs195 as we roll over to FY12E).
implies potential upside of about 0.5%. We retain Neutral on the stock and NTPC is
currently trading at mid cycle multiples.

 We would turn positive on the stock on signs of improvement in NTPC’s ability to
execute the projects as per the indicated timelines.
 We revise our FY11E/12E/13E EPS by -1%/0%/-6% to reflect changes in our
estimate of commissioning timelines of the projects.
 Key risks include faster/slower than expected commissioning of capacity.