NTPC - Performance impacted by backing down & poor fuel supplies; Maintain 'ACCUMULATE'; TP Rs182 - PINC Research

Q3FY12 Result Review – NTPC

Performance impacted by backing down & poor fuel supplies

NTPC's Q3 FY12 performance was impacted by continued backing down by SEBs and poor fuel supply. Coal and gas station PAF contracted by 835 and 110bps to 85.3% and 94.5% respectively – thus impacting its incentive income. This coupled with preponed maintenance shutdown at a few stations and under-recoveries due to lower than normative PAF for some stations, translated into lower than expected adjusted PAT of Rs21.7bn – lower 7.7% yoy. We continue to maintain ACCUMULATE rating on the stock with a target price of Rs182/share.

- Weak Q3 FY12 performance
- Debtor days worsen
- Maintains capacity addition target of 4.9GW in FY12
- Runs the risk of continued backing down

Outlook and recommendation – We continue to build in capacity addition of 2.8GW and 4.2GW during FY12 and FY13 respectively. Although we maintain ACCUMULATE rating on the stock, we believe NTPC's earnings quality is likely to deteriorate due to concerns on fuel supply and hence low availability. Other risks to earnings growth for NTPC are 1) continued backing down by SEBs and 2) slow capacity addition.

Source : Equity Bulls

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