NTPC: Target well within reach

ANALYSTS' CORNER

CLSA Research rates NTPC as an "outperformer". The report states that NTPC management remains confident of achieving the target of doubling its generation capacity by 2012. A part of the capacity added during the 11th plan (FY08-12) could be in the form of merchant power plants.

NTPC's coal mining operations are also likely to commence in FY08. Coal mining and merchant power plants should provide upside to earnings estimates and DCF value, according to the report.

Despite the much talked about coal shortages, in FY05 NTPC's overall coal receipts from Coal India were 2-3 per cent higher than target. As a result NTPC's total power generation was up nine per cent in FY05 and it achieved its highest ever capacity utilisation of 87.5 per cent.

For FY06 the company is tying up for four mt of coal imports to meet any likely shortages. NTPC remains the core pick on India's rising power shortages, as per the report.

Yes Bank: minimum interest rate risk

Merrill Lynch, initiating coverage, recommends a "buy" on Yes Bank. The report expects a 1.75 per cent CAGR in earnings led by 122 per cent CAGR of loans and 16-fold rise in fee revenues as per FY05-08E.

The bank has minimum interest rate risk and manageable asset quality with gross NPL's forecast to remain lower than 1.5 per cent and net NPL's below 0.5 per cent. ROE is expected to rise to 24 per cent by FY08E and to 14 per cent in FY06E.

The report adds that the bank has one of the lowest PPP-PEG ratios (0.12x in FY07E) in the region. It should be able to gain market share on the asset side using its domain knowledge approach, especially in the SME segment and given the vast market opportunity for new players that can provide a strong value proposition.

Owing to such reasons, the report believes that the bank could arguably trade at the upper end of the 3.5-4.0x P/ABV range.

NDTV: amidst stifling competition

Batlivala & Karani Securities, initiating coverage on NDTV, recommends a "sell". Indian television industry with a 46 per cent share in ad-industry ($ 2.6 billion) is steaming with 200 channels vying for market share.

News segment (highest growth segment at about 36 per cent CAGR over FY04-06E) with 30 channels contributes 12 per cent to this ad-pie, where NDTV is the leader holding 29 per cent market share.

At the same time, with five more channels slated to be launched by the end of FY06, competition is intensifying. NDTV, being the leader, would find it tough to acquire additional market share.

Moreover, attrition at senior management level has resulted in the company giving about 30 per cent salary hike in Q1 FY06. This pulled down margins by 11 percentage points for the quarter and would have a significant impact for full FY06.

Expected launch of entertainment channel in FY07 would shoot up costs further and with increasing tax rate, would dampen earnings growth. The stock trades at 41x FY06E and 33x FY07E earnings.