>NTPC: FY10 Adjusted PAT inline (CENTRUM)

NTPC’s Q4 results were inline with our estimates at operational level. Though reported PAT at Rs20.2bn was lower than estimate due to lower other income, adjusted PAT for the full year was inline. Reiterate Buy.

■ Q4 PAT marginally below expectations: Sales increased 4.2% YoY to Rs127.3bn, 7.6% above our estimate. EBT, which is the right profitability measure for NTPC’s cost plus model, was inline with our estimate of Rs18.3bn. PAT at Rs20.2bn was 15.1% lower than our estimate due to lower other income.

■ …but full-year adjusted PAT inline: Adjusted FY10 PAT (after adjusting exceptional items like provision for higher wages, prior period adjustments in sales and income tax refunds) came to Rs89.4bn, inline with our estimate of Rs90.9bn.

■ To retain 80IA benefit; no MAT at plant level: The management has clarified that there would be no minimum alternate tax (MAT) at plant level. This strengthens our view that plant-level ROEs for NTPC’s projects with 80IA benefit would be ~30%.

■ FY10 PAF was 91.4% for coal plants and 90.6% for gas plants: FY10 average PAF was ~91%, 200bp lower than what we have factored. But high PAF levels (98.3% for coal plants and 93.8% for gas plants) during Q4 sights improving PAF levels.

■ Reiterate Buy with target price of Rs260. We believe the stock should trade at 3.0x-3.3x FY11E P/BV, assuming sustainable ROE of ~19% from FY13E, earnings growth of ~14% over FY10-17E, sufficient cash to fund its expansion projects and dividend yield of ~3%. We reiterate our Buy with a target price of Rs260 (including value of Rs8 from the JV projects), which implies a P/BV of 3.0x on FY11E standalone BVPS of Rs82.1.

To read the full report: NTPC