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NTPC (NTHPF, Underperform)
Bear Case: What can go wrong
On likely narrowing of power deficit to mid-single digits, we assume the Govt.
cuts regulatory return on equity to 14% vs 15.5% from FY14E.
Assume a 25% cut in UI charges, availability, thermal and other incentives
due to lower utilization (cut PLF by 300bps) due to shortage of coal.
Removed North Karanpura 1.98GW project (8% of 12th plan capacity
addition) due to its location on coal bearing areas which is being opposed by
Coal India. However, we still grow parent capacity to reach 63GW vs 31GW
now.
Consequently, we estimate EPS to grow by 11% in FY13 and 2% in FY14E
leading to 6-11% cut in EPS over FY13-14E.
Base Case:
We expect regulatory return on equity continued to remain at 15.5% from
FY14E.
In the base case, we expect the stock could trade at Rs192/share based on
DCF translating into 1.97x FY13E P/BV.
Risk-Reward: Unfavorable on limited upside
In the bear case, we expect the stock could trade at Rs164/share based on
DCF translating into 1.7x FY13E P/BV.
In the base case, we expect the stock could trade at Rs192/share based on
DCF translating into 2x FY13E P/BV.
Overall, the risk-reward appears unfavorable
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NTPC (NTHPF, Underperform)
Bear Case: What can go wrong
On likely narrowing of power deficit to mid-single digits, we assume the Govt.
cuts regulatory return on equity to 14% vs 15.5% from FY14E.
Assume a 25% cut in UI charges, availability, thermal and other incentives
due to lower utilization (cut PLF by 300bps) due to shortage of coal.
Removed North Karanpura 1.98GW project (8% of 12th plan capacity
addition) due to its location on coal bearing areas which is being opposed by
Coal India. However, we still grow parent capacity to reach 63GW vs 31GW
now.
Consequently, we estimate EPS to grow by 11% in FY13 and 2% in FY14E
leading to 6-11% cut in EPS over FY13-14E.
Base Case:
We expect regulatory return on equity continued to remain at 15.5% from
FY14E.
In the base case, we expect the stock could trade at Rs192/share based on
DCF translating into 1.97x FY13E P/BV.
Risk-Reward: Unfavorable on limited upside
In the bear case, we expect the stock could trade at Rs164/share based on
DCF translating into 1.7x FY13E P/BV.
In the base case, we expect the stock could trade at Rs192/share based on
DCF translating into 2x FY13E P/BV.
Overall, the risk-reward appears unfavorable
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