Sell NTPC, target of Rs 175: IIFL

IIFL has recommended a sell rating on NTPC with a target price of Rs 175 in its May 26, 2009 research report.

“NTPC’s audited FY09 PAT was 5% above the provisional numbers, primarily
on account of tax write-backs of Rs 3.8 billion pertaining to other income. Adjusting for these tax refunds, NTPC’s FY09 PAT grew 5% YoY—in billion with our estimate—as no major capacity was added during the year. For FY09, while coal PLFs remained strong at 91%, gas/liquid fuel PLFs remained low (68%), primarily on account of shortage of fuel. Overall plant availability for the year was strong at 92.5%. Accordingly, core RoE for the business remained strong at 21%, flat YoY.”

“NTPC’s audited results were in billion with the provisional numbers after adjusting for one-time tax refunds of Rs 3.8 billion. Operating performance remained strong, with the core book earning an RoE of 21%. During the conference call, the company indicated that it is well prepared to add the targeted 22.4GW capacity by FY12, and also start production from the coal mines by end-FY10. Although NTPC continues to lag behind capacity addition targets, we are upgrading FY10ii and FY11ii earnings by 4% and 10% respectively to factor in new tariff guidebillions. However, in our view, the stock’s rich valuations—5.2x core FY10ii book—adequately factor in these positives. Sell, target of Rs 175,” says IIFL’s research report.

source: Moneycontrol

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