Adjusted for one-offs 1) write back of depreciation and AAD (Rs17.6bn), 2) provisions (Rs12.6bn), 3) prior period sales (Rs1.8bn), 4) incentives given to employees (Rs1.2bn) and 5) deferred tax liability arising out of change in accounting policy for depreciation (Rs2.4bn), NTPC's Q2 FY11 adjusted PAT of Rs16.7bn was below our estimate and 22% lower than Q2 FY10. During the quarter it commissioned 490MW at Dadri. As a result, NTPC's generation was higher by 3.7% y-o-y to 52.2BU..

Grossing up the RoE by MAT and one-off's hit PAT

Capacity addition remains muted

CEA estimates 2.5GW to be added during FY11

VALUATIONS AND RECOMMENDATION With only 25% of FY11 capex actually spent in H1 FY11, we remain conservative in building in fresh capacity. We reduce our revenue estimates to reflect grossing up of its RoE by MAT rate as compared to normal tax rate earlier.

NTPC currently trades at P/BV of 2.4x FY11E and 2.2x FY12E. In line with its historical 1-year forward P/BV of 2.4x, we roll forward to FY12 to arrive at our upgraded target price of Rs216, upside of 9.3%. However, we retain our 'HOLD' recommendation in light of delays in capacity addition.