NTPC

Powering its way through-Buy:

Shares Market

24 X 7 News

Career

Mutual Fund India

Banking

Information Technology

Jindal Steel

Macroeconomic Outlook

Metal & Mining

Bse Nse

Shares Tips

Share Market India

NTPC

PowerSector

State Bank Of India

Tech Mahindra

1.NTPC's capacity addition plans are expected to fall in place as per schedule.Its sound financials and the Government of India backing should ensure timely completion of projects. Stable revenue generating business and a sizable cash balance should enable NTPC to fund its expansion plans and transform itself from a 30 GW capacity company at present into a 50 GW power behemoth by 2012.

2.The Company is focusing on solving its fuel shortage problem. It is expected to sign a Fuel Supply Agreement (FSA) with Coal India Limited (CIL) in January 2009, providing NTPC with assured coal supply for 80–90% PLF.Given the acute scarcity of coal in the current scenario, the pact would significantly boost the Company's gro wth momentum. In addition, NTPC has acquired 7 coal mine blocks in India, with coal production to commence from the first mine by 2009–10.

3.The Company's decision to enter into JVs with private players such as BHEL,TELK, and Bharat Forge to undertake EPC activities and produce power equipments would not only generate incremental revenues but also help in meeting its own requirement in the long run. Though we have not considered this in our valuation due to lack of visibility, any positive development on this front would only improve our valuation.

4.Our three-stage DCF valuation gives us a fair value of Rs. 210, assuming a 5% terminal growth rate and a 10.5% WACC. At the current market price of Rs. 179.5, NTPC's stock is trading at a forward P/E of 17.4x and 15.4x for FY2009E and FY2010E, respectively. We remain bullish on the Company's stock and maintain a Buy rating.

Tata Power:

Galloping into the future-Buy:

1.Tata Power Company (TPC) established its international footprint in FY08 through the acquisition of a 30% stake in two major Indonesian coal mines, PT Kaltim Prima Coal and PT Arutmin Indonesia. The Company also completed the financial closure of the 4,000 MW Mundra Ultra Mega Power Project (UMPP) and the 1,050 MW Maithon power project during the year.

2.TPC's total capacity is expected to grow at a CAGR of 43% during FY09–FY13.The incremental capacity addition is poised to increase at a CAGR of 71% during the same period, as the Company has targeted a capacity addition of 10,000 MW in the next five years.

3.The Company currently holds a good profile of assets in the power generation,transmission, and distribution businesses; these should continue to generate stable revenues in the near term. TPC’s transmission and distribution (T&D) business has a good presence in metros such as Mumbai and Delhi and holds a huge gro wth potential in the country. The power trading business is also one of the fastest growing businesses of the Company as it has grown at a CAGR of 27% during the last three years and is well positioned to capitalise on the growing trading market.

4.We remain upbeat about the Company’s future on the back of its upcoming projects. Based on our SOTP valuation, we have arrived at a target price of Rs. 872, which implies an upside potential of 19.1% from the stock’s CMP of Rs. 732.3.