NTPC (Q4 FY13) – BUY
India Infoline News Service | Mumbai |
Surprisingly even PLF improved 2.8% points sequentially to 86.9%; though down 4.2% points yoy
CMP Rs154, Target price Rs187, Upside 21.4%
- Largely in line with the estimate, NTPC reported revenue of Rs164.6bn up by 4.4% qoq
- Adjusted PAT registered growth of 23% yoy to Rs26.9bn
- Generation remained flattish despite growth in capacity
- The coal PAF improved to 92.7% registering improvement of 4.1% points qoq and higher by 1.1% points yoy
- Surprisingly even PLF improved 2.8% points sequentially to 86.9%; though down 4.2% points yoy
- Availability factor for coal-based plants in FY13 was 87.6% vs. 88.4% in FY12
- NTPC added 3.2GW at the standalone level and 4.2GW at the consolidated level, in line with the company’s original FY13 target
- We maintain BUY with a target price of Rs187
| (Rs mn) | Q4 FY13 | Q4 FY12 | %yoy | Q3 FY13 | % qoq |
| Generation (BU) | 60.3 | 59.9 | 0.6 | 60.2 | 0.2 |
| Sales (BU) | 56.4 | 58.0 | (2.8) | 56.3 | 0.2 |
| Realisation (Rs/unit) | 2.9 | 2.8 | 4.1 | 2.8 | 4.2 |
| Net sales | 164,618 | 162,636 | 1.2 | 157,749 | 4.4 |
| Material cost | (103,897) | (104,430) | (0.5) | (100,982) | 2.9 |
| Personnel cost | (9,814) | (8,963) | 9.5 | (6,916) | 41.9 |
| Other overheads | (11,843) | (7,953) | 48.9 | (9,899) | 19.6 |
| Operating profit | 39,065 | 41,290 | (5.4) | 39,952 | (2.2) |
| OPM (%) | 23.7 | 25.4 | (166) bps | 25.3 | (160) bps |
| Depreciation | (10,213) | (7,363) | 38.7 | (8,288) | 23.2 |
| Interest | (5,912) | (4,870) | 21.4 | (5,304) | 11.5 |
| Other income | 34,555 | 7,683 | 349.8 | 7,546 | 357.9 |
| PBT | 57,495 | 36,740 | 56.5 | 33,907 | 69.6 |
| Tax | (13,679) | (10,640) | 28.6 | (7,940) | 72.3 |
| Effective tax rate (%) | 23.8 | 29.0 | (517) bps | 23.4 | 38 bps |
| Reported PAT | 43,816 | 26,100 | 67.9 | 25,968 | 68.7 |
| Adjusted PAT | 26,920 | 21,881 | 23.0 | 25,500 | 5.6 |
| Adj. PAT margin (%) | 16.4 | 13.5 | 290 bps | 16.2 | 19 bps |
| EPS (Rs) (Annualised) | 13.1 | 10.6 | 23.0 | 12.4 | 5.6 |
NTPC reported revenue of Rs164.6bn up by 4.4% qoq
Largely in line with the estimate, NTPC reported revenue of Rs164.6bn up by 4.4% qoq. Revenues grew higher than the growth in generation despite adding capacities on the back of higher realisations. Management stated that non availability of imported coal hampered the growth in generation; whereas there was more than 100% realisation from coal India. The management confirmed the resolution of issues related to imported coal. Hence we expect improvement in PLF going forward.
PLF and PAF improvement are signs of recovery
NTPC coal station PAF during Q4 FY13 stood at 92.6% as against 88.6% in Q3 FY13, higher by ~4.1% points qoq and 1.1% percentage points yoy. NTPC received 41.8mmt of domestic coal in 4Q FY13 as against 38mmt in 3Q FY13, up 10.2% yoy and ~4% qoq. Resultantly blending of imported coal came down to 5.18% from 6.49% of Q3 FY13 and 5.35% of Q4 FY12. Consequently, PAF and PLF were also higher than estimated. Surprisingly even PLF improved 2.8% points sequentially to 86.9%; though down 4.2% points yoy.
Cost-Analysis
| As a % of net sales | Q4FY13 | Q4FY13 | bps yoy | Q3FY13 | bps qoq |
| Material cost | 63.1 | 64.2 | (110) | 64.0 | (90) |
| Personnel cost | 6.0 | 5.5 | 45 | 4.4 | 158 |
| Other overheads | 7.2 | 4.9 | 230 | 6.3 | 92 |
| Total costs | 76.3 | 74.6 | 166 | 74.7 | 160 |
Reported PAT registered 67.9% yoy growth to Rs43.8bn
NTPC reported PAT growth of 67.9% yoy to Rs43.8bn. Adjusted net income was below our estimate by 10% on account of increase in other expenses led by higher water charges and repair and maintenance across the units. Company recorded Rs17bn of gain mainly on account of interest income towards settlement of Delhi state board dues which has inflated the reported PAT. Reported employee expenses seem higher but, adjusted employee expenses are in line with the sales (adjustment of Rs2bn in last quarter and addition of capacity related expenses of ~Rs2bn in this quarter).
Other operational highlights
NTPC commissioned 3.2GW at the standalone level and 4.2GW at the consolidated level, in line with the company’s original FY13 target
Coal stock as on date stands at 7 days of requirement i.e. 4.6mmt
Outlook & Valuation
We believe NTPC’s earnings visibility remains high with assured return model and increasing capacities. Currently, the concerns over domestic fuel availability and deteriorating health of SEBs make the utilities space risky. But, for NTPC Improved pace of capacity addition and a resilient business model increase visibility of the XIIth plan targets. We believe with improving PAF and robust capacity addition, the growth in sales and ROE is inevitable. We maintain BUY with a target price of Rs187
Financial Summary
| Y/e 31 Mar (Rs m) | FY12 | FY13 | FY14E | FY15E |
| Revenues | 658,937 | 693,768 | 764,773 | 847,091 |
| yoy growth (%) | 10.7 | 5.3 | 10.2 | 10.8 |
| Operating profit | 154,411 | 181,825 | 180,436 | 202,806 |
| OPM (%) | 23.4 | 26.2 | 23.6 | 23.9 |
| Reported PAT | 98,128 | 110,179 | 114,621 | 122,063 |
| yoy growth (%) | 4.9 | 12.3 | 4.0 | 6.5 |
| EPS (Rs) | 11.9 | 13.4 | 13.9 | 14.8 |
| P/E (x) | 12.9 | 11.5 | 11.1 | 10.4 |
| Price/Book (x) | 1.7 | 1.6 | 1.4 | 1.3 |
| EV/EBITDA (x) | 10.5 | 9.4 | 10.2 | 9.2 |
| Debt/Equity (x) | 0.8 | 0.8 | 1.0 | 1.1 |
| RoE (%) |
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