Largely in line with our estimates, NTPC reported operating revenues of Rs159bn registering 12.6% yoy growth
PLF for NTPC coal station during the Q1 FY13 stood at 86% as against 91% in Q4 FY12, lower by ~6% qoq and 1% lower by yoy. Though the revenues are in line with estimates, the result would have been better primarily on account of higher fuel cost. But, NTPC continued to make payments on pre-revised rates of CIL (UHV rates), factoring the increased coal price as a contingent liability which ultimately led to lower realisations.
Net income registered growth of 20% yoy to Rs24.9bn led by lower effective tax rate at 23% during the quarter
NTPCs reported higher PAT significantly led by lower tax rate of 23% as against 29% in Q1Y12. Higher taxes in the past were led by the deferred tax assets. Addition to lower tax, higher other income also aided the growth in yoy PAT. The company partially lost out on account of SEBs backing down and lowers realization which ultimately resulted in lower income. NTPC has commissioned 2160MW & commercialized 1160MW, in Q1 FY13. Effective regulated equity currently stands at Rs283bn, up 10.4% yoy and 3.9% qoq.
Outlook & Valuation
With assured return model and increasing capacities, NTPC’s earnings visibility remains high. We expect 2400MW capacity addition in next two years. We keep our ROE assumption at 15.5% and we expect lower incentive income for the company accordance with a change in CERC regulation. Currently, the concerns over domestic fuel availability and deteriorating health of SEBs make the utilities space risky. But, since the stock has corrected by more than 15% in last month and it’s being a good defensive play which leads to favourable risk reward, we maintain BUY on NTPC with a revised 9-month price target of Rs174/share.
Key take-away from the Analyst meet