NTPC (Q1 FY13)

• Largely in line with our estimates, NTPC reported operating revenues of Rs159bn registering 12.6% yoy growth
• Generation units increased by 7.8% yoy while net sales grew by 12.6% yoy on account of higher realisations
• Net income registered growth of 20% yoy to Rs24.9bn led by lower effective tax rate at 23% during the quarter and higher other income
• The coal PAF declined to 88.8% registering drop of 587bps qoq
• Added ~2160 MW capacity in Q1 FY13

Result table

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

• Debtor days improved to 32 days in Q1FY13 as compared to 35 days in FY12.
• More than 2100MW capacity added in Q1 FY13 itself; never happened in any quarter before
• Nil outstanding with SEB in Q1
• Target to be 1,28,00MW company by 2032
• As on date CWIP is Rs401bn out of which 150bn is of equity which is locked in CWIP
• Regulated equity increased by 13% from 29,292 cr in 2012 to 32,431 in 2013
• Generation growth is 7.8% against all India of 6.4% in Q1 Fy13
• Materialisation for last 45 days from Coal India is at more than 100%.