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Tuesday, November 25, 2008

India Infoline Views on Largecap Power Stocks - Power Grid, NTPC

Power Grid

The company has aggressive capex plans of Rs 550bn for the 11th Five Year Plan in line with the government’s target of increasing the national power transmission capacity to 37.7GW by FY12. The aggressive capex augurs well for PGC whose earnings growth is driven by growth in the gross block. PGC has a stable business model wherein it earns a cost pass through and a 14% return on regulatory equity plus performance.

NTPC

NTPC is India’s largest and leading power generation utility. It produces 29% of total electricity in India with an installed capacity of 30GW, which it plans to take to 50GW by FY12 and 75GW by FY17. We believe NTPC will be able to execute atleast ~80% of the planned capacity addition in time based on its unparalleled execution capabilities, cash balances of Rs170bn, low gearing at 0.52x and easy access to funds.

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