We maintain our ‘outperform’ rating on NTPC shares, given the company’s relatively de-risked and scalable business model, healthy balance sheet and strong earnings growth. We also assign a target price of Rs 200 per share, implying 1.7x FY15e PBR. In our view, valuations are compelling, as the stock trades at 1.3x FY15e PBR and is below -1 standard deviation from its historical average.
We close our ACT call on NTPC. The stock has outperformed the BSE power index by 11% since February 21. It has outperformed its IPP peers, Adani Power by 29%, Jaiprakash Power by 43% and Tata Power by 12%. However, it has underperformed the Sensex by 6% due to a sectoral overhang.
However, our long-term thesis remains intact. We expect the company to perform on two key parameters — capacity addition and plant availability. We expect NTPC to add c.9.4-GW capacity over FY13-15e. Also, we expect the plant availability of coal-based plants to improve from FY13 levels (87.6%). The PAF should improve as domestic coal supply from CIL improves with the recent signing of the FSA.