Kotak Institutional Equities upgrades NHPC to 'add'; maintains price target of Rs 26

NEW DELHI: Kotak Institutional Equities has upgraded NHPC to ‘add’ from ‘reduce’ earlier. However, the brokerage has maintained its price target of Rs 26.

At 10:20 am, NHPC was trading 0.7 per cent higher at Rs 21.25. It has hit a low of Rs 21.10 and a high of Rs 21.40 in trade today.

Kotak feels the recent steep correction in the stock provides an attractive entry point. The brokerage firm also expects marginal improvement in return on equity after the commissioning of new capacities.

With encouraging capacity addition in FY2013 after a long hiatus of two years, the regulated equity base has expanded to Rs 8/share. The stock now looks attractive even on extant earnings, the brokerage said.

Kotak factors in marginal improvement in NHPC’s blended RoE of 8 per cent after commissioning of new capacities, as Rs 75 bn of CWIP was stuck in projects, which continues to deprive NHPC of fully absorbing its core business RoE of 16 per cent.

“We maintain our target price of Rs 26 and earning estimates of Rs 2/share in FY2014E and Rs 2.3/share in FY2015E,” said a Kotak Institutional Equities report.