Analysts' corner

NTPC & United Spirits

NTPC
CMP: Rs 183.5,
Current Intrinsic Value: Rs 246
CARE Equity Research assigns fundamental grade of 5/5 to NTPC indicating ‘Strong Fundamentals’. The grade draws strength from NTPC’s leadership position in India’s power generation sector, commendable execution track record, revenue security through power purchase agreements for existing as well as new capacities and fuel security through long term coal supply agreements. Foray in forward and backward links like coal mining, power trading and equipment manufacturing to some extent adds to the strength of the company. ‘Maharatna’ status gives it autonomy in its business decision-making. Low interest costs, reasonable gearing levels, healthy cash balance, 100 per cent realisation of power bills and healthy dividend payment track record indicates strong financial position. It plans to double the power generating capacity by FY17. However, the timely completion of expansion projects, timely and continuous availability of fuel and timely availability of equipment as key moniterable for the company.

— CARE Equity Research

UNITED SPIRITS
Reco Price: Rs 2,276,
Target Price: Rs 2,335
United Spirits 4QFY11 standalone results were in line with estimates. Net sales grew 27.5 per cent to Rs1600 crore, volume growth was 12 per cent; EBITDA margins declined by 120bp to 13.3 per cent and adjusted net profit increased by 36.2 per cent to Rs 77 crore due to flat interest costs and a 39 per cent increase in other income. Analysts have cut their FY12 and FY13 volume growth estimates to 12.5 per cent in each year from 13.7 per cent and 13.1 per cent respectively. In 4QFY11 ENA prices/case for United Spirits increased 5 per cent QoQ to Rs150/case. Sourcing of ENA from new acquisitions like Pioneer and Sovereign Distilleries is likely to cut costs for the company. Analysts model a 4 per cent decline in ENA prices in FY12 and a 3 per cent increase in FY13. Maintain neutral.

— Motilal Oswal Securities