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Research
NTPC - Results below expectations, but valuations attractive - BRICS
Posted On : 2012-05-16 11:16:47( TIMEZONE : IST )
NTPC's results were below our and consensus estimates with PAT at Rs24.6bn, down 8% yoy (vs. estimate of Rs28.3bn) mainly on account of lower other income and higher tax rate. Revenue went up 6.5% yoy driven by coal-cost escalations and generation growth. NTPC's operational performance was partly impacted by lower plant availability yoy, despite sharp improvements qoq. However, we see lower PAFs for FY12 as an aberration and expect these to improve in FY13 with better coal supply. We believe the stock is attractive at a P/B of 1.5x FY13. Maintain Buy.
Generation impacted by grid restrictions: Generation and sale of energy increased by only 4% and 3.4% yoy partly due to grid restrictions where about 4.2bn units were lost. However, 3% growth in average tariffs mainly from coal cost escalations pushed revenues up by 6.5%.
Lower PAF affected incentives: NTPC's coal PAFs were down to 94.7% vs. 96.5% yoy, primarily due to lower supplies from CIL, which affected incentives. However, gas PAFs improved to 98.7% from 96.9%. As the company lost units due to grid restriction, resultant lower PLFs affected its ability to gain on heat rate for generation lost. Decline in administrative expenses (down 17.4%) was aided by advancement of maintenance to Q3. EBITDA margins remained flat at 24.4%. After adjusting for prior-period sales and tax, NTPC posted an adjusted PAT of Rs24.6bn, (reported PAT of Rs25.9bn) a decline of 8% yoy partly due to lower tax expense in Q4FY11 at 14.6%.
Outlook: Generation remained flat to 222.1bn units in FY12, in spite of higher capacities, due to fuel shortages and back downs by SEBs. However, fuel supply position is good till May 2012 and we expect a better situation in FY13. NTPC is expected to add about 4.16GW in FY13 and it targets to add 14GW in the 12th plan.
Valuation attractive: The stock trades at an FY13 P/B of 1.5x, which is attractive. While the country faces severe coal shortage, we believe NTPC is the best placed amongst peers in terms of fuel security. Our DCF-based fair value for NTPC remains Rs211. Maintain Buy.
