Motilal Oswal is bullish on NTPC has recommended buy rating on the stock with a target price of Rs 195 in its research report dated January 30, 2019.
Motilal Oswal’s research report on NTPC
Standalone (S/A) PAT increased by just ~1% YoY to INR23.8b (below our estimate of INR26.4b), as higher working capital led to an increase in interest cost. Higher working capital/cash requirements would have impacted the company’s other income as well, in our view, which declined by 40% YoY (45% miss). Moreover, fixed charge u/recoveries continued, given coal shortages/plant unavailability. PAT adjusted for prior period and u/recoveries declined ~8% YoY. Fixed charge u/recoveries declined 16% QoQ to INR2.8b in 3QFY19. Management guided for a decline in u/recoveries to ~INR7.5b in FY19 (v/s ~INR11b in 9MFY19 and ~INR14b in FY18), given the improvement in coal availability and the restart of Unchahar unit #6 (500MW). Interest cost rose 20% YoY to INR12.8b, as working capital increased due to higher receivables for the renewable business and ongoing advance to railways for preferential rake allotment.
We expect NTPC’s core performance to improve in FY20 as u/recoveries reduce. This apart, NTPC has a strong pipeline of projects. We expect a CAGR (FY18-21) of ~16%/11% in NTPC’s regulated equity/PAT. RoE is estimated to increase to ~13% by FY21 as capitalization picks up. Our DCF-based TP is INR195/sh. Maintain Buy.
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