NTPC (Q2 FY13)

India Infoline News Service | Mumbai |

NTPC (Q2 FY13)

CMP Rs170, Target Rs179, Upside 5.1%
  • In line with our estimates, NTPC reported operating revenues of Rs16.1bn registering 5% yoy growth
  • Generation units decreased by 10% yoy while net sales grew by 5% yoy on account of higher realisations
  • Net income registered growth of 29.7% yoy to Rs31.4bn led by sharp decline in material cost along with higher other income and prior period adjustments
  • Adjusted PAT at Rs20.4bn is below our estimates led by lower generation and higher overheads
  • The coal PAF declined to 80.1% registering drop of 8.26% percentage points qoq and lower by 3.3% percentage points yoy
  • We maintain our market performer rating with a revised 9-month target price of Rs179
Result table (Standalone)
(Rs mn) Q2 FY13 Q1 FY13 % qoq Q2 FY12 % yoy
Generation (BU) 52.7 58.9 (10.5) 50.9 3.6
Sales (BU) 48.9 54.6 (10.5) 46.9 4.2
Realisation (Rs/unit) 3.3 2.9 12.9 3.3 0.6
Net sales 161,197 159,600 1.0 153,775 4.8
Material cost (99,327) (105,977) (6.3) (106,494) (6.7)
Personnel cost (8,965) (7,907) 13.4 (7,846) 14.3
Other overheads (10,663) (9,410) 13.3 (7,046) 51.3
Operating profit 42,243 36,306 16.4 32,389 30.4
OPM (%) 26.2 22.7 346 bps 21.1 514 bps
Depreciation (7,865) (7,602) 3.5 (6,583) 19.5
Interest (3,035) (4,994) (39.2) (3,312) (8.4)
Other income 10,482 8,849 18.5 10,093 3.9
PBT 41,825 32,559 28.5 32,588 28.3
Tax (10,402) (7,573) 37.4 (8,347) 24.6
Effective tax rate (%) 24.9 23.3 161 bps 25.6 (74) bps
Reported PAT 31,424 24,987 25.8 24,241 29.6
PAT margin (%) 19.5 15.7 384 bps 15.8 373 bps
EPS (Rs) (Annualised) 15.2 12.1   25.8 11.8   29.6
Source: Company, India Infoline Research

NTPC reported operating revenues of Rs16.1bn registering 5% yoy growth

NTPC reported operating revenues of Rs16.1bn registering 5% yoy growth. PLF for NTPC coal station during the Q2 FY13 stood at 74.8% as against 86.4% in Q1 FY13, lower by ~12% qoq and 4% lower yoy. Though the revenues are in line with estimates, the result would have been better primarily on account of higher realization (NTPC started paying on GCV method to CIL instead of UHV rates, factoring the increased coal price led to higher realisations). Lower generation was primarily led by lower PLF on account of units going under regular maintenance and even grid restriction along with lower fuel availability led to lower generation.


Net income registered growth of 29.7% yoy to Rs31.4bn led by sharp decline in material cost along with higher other income and prior period adjustments;  

Net income registered growth of 29.7% yoy to Rs31.4bn while adjusted PAT at Rs20.4bn is below our estimates led by lower generation and higher overheads. NTPCs reported higher PAT significantly led by lower tax rate, higher other income. Also, prior period adjustments aided the growth in PAT. Generation in the current fiscal so far has been effected by lower imports and consequent lower average cost of fuel. There is seasonality in the power generation and this leads to lower generation second quarter (prior to festival season). Management commented that generation in the third quarter has started looking up (higher PLF). Plant availability factor has also shown a healthy recovery in October and is at 82.10%.

Outlook & Valuation
²  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. We believe currently the valuation in terms of risk reward is balanced. We maintain our market performer rating with a revised 9-month target price of Rs179.


 

As a % of net sales Q2FY13 Q2FY12 bps yoy Q1FY13 bps qoq
Material cost 61.6 66.4 (478) 69.3 (763)
Personnel cost 5.6 5.0 61 5.1 46
Other overheads 6.6 5.9 72 4.6 203
Total costs 73.8 77.3 (346) 78.9 (514)

Source: Company, India Infoline Research

Key take-away from the conference call:

  1. As on September 2012, total install capacity of NTPC group is 39,174MW, which includes 4,364MW capacity owned JV subsidiary companies. The commercial capacity of NTPC group stood at 37,236MW including 62MW of the official integrated capacity of gas pressure
  2. NTPC commissioned 2,160MW during current fiscal till date and declared 2,820MW in the commercial operation. As on date the capacity under the construction is 16,809MW and the Regulated equity is Rs300.1bn
  3. Plant availability factor has started recovering in October and it’s at 82.10% for both station as against 74.85%
  4. The overall domestic coal availability in Q2 FY13 was 32MT as compared to 25.7MT in Q2 FY12, an increase of 24.51% yoy. Materialization of coal was 103.87% in Q2 FY13 v/s 88.69% in Q2 FY12 and against 98.29% in Q1FY13. The supply of imported coal was 1.5 MT, as against 2.77 MT in Q1 FY13, at 3.90MT in quarter Q2 FY12. The blending percentage of imported coal stood at 4.75% in Q2 FY13 as against 12.83% in Q2 FY12.
  5. NTPC is still awaiting formal communication regarding de-allocation of the three coal mines. Management comments that the reallocation would come very soon
  6. NTPC continues to realize 100% of the outstanding from SEBS. As on September 2012, Rs61bn is outstanding, this translates to 35 days sales as compared to 32 days sales as on June 2012 and 35 days as on 31st March 2012
  7. NTPC finally agreed to GCV methodology of Coal India. Management comments that there is no impact on profitability as cost is a pass through for the company. The impact is only a 7 or what 8 paisa per unit.
  8. The higher interest-income on deposit with Indian banks and higher dividend from the joint venture increased the other income to Rs8.2bn.

Financial Summary

Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues 595,054 658,937 683,205
BSE 175.80 [2.45] ([1.37]%)
NSE 175.90 [2.45] ([1.37]%)

***Note: This is a NSE Chart

 

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