Sunday, February 07, 2010

NTPC FPO: Subscribe Target: Rs.235

NTPC's FPO is available at 201 for retail investors. Having had the opportunity to do a fairly detailed analysis of this company, I arrived at FY 2009-10 EPS estimate of 11.2 on a consolidated basis. Since NTPC debuted, on the bourses, the P/E multiple accorded to it my the market has averaged at about 18. The average multiple over the last 8 quarters stands at 22 with an uptrend over the last 3 successive quarters. At a multiple of 21,the stock should be worth Rs. 235 by the end of this fiscal year. This earnings estimate does not include the potential additional upside from a possible government move allowing the company to sell the 15% power, which is reserved for the center, in the open market.

Considering the recent market down-trend, if somebody is to ask me whether the stock will decline post its FPO to a level lower than Rs. 201, my answer is, I dont know. But I do have a two word strategy for those who expect such a scenario to play-out. Average-out! Of the sum you have set aside for investig in NTPC, deploy a bigger portion in the FPO and hold the rest for to buy on dips post the FPO.

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