Accumulate NTPC - CMP: Rs.148, TP: Rs.180 - Prabhudas Lilladher

Capacity addition on track: NTPC has commissioned close to 3820MWs (from our estimated 4160MWs for FY13E) of capacity during 9MFY13 which is one of the fastest and highest additions as compared to its past. On account of this and improved coal availability, NTPC's PLFs, which suffered on account of lower coal supplies and grid restrictions in H1FY13, improved to 84% in Q3FY13, leading to a 7% YoY growth at 60.1bn units. However, the availability (PAF) showed a robust increase to 88.5% from 80.4% in Q2FY12, leading to higher incentives. Availability of Gas stations increased to 93.8% from 90% in Q2FY12. Further, we expect 3500MWs commercialization in FY14E and 4000MWs in FY15E.

Coal supply situation under control: NTPC has always enjoyed merit in dispatches of coal and will continue to do so in the future. The shortages in domestic coal supply will be met by imports of 3-5mt every year. The new scheme of coal pooling, where CIL will be supplying imported coal, will also augur well for the company as it will receive close to 5-8MTs from it. Pakri-Barwadih captive mine, is also expected to contribute from FY14E, with 2-5MTs initially. Above this, reallocation of three captive blocks, which can contribute close to 10MT (initially) from FY15E, should mitigate long-term fuel supply risks.

Valuations: With close to 38GWs of operating capacity and further 15GWS in the offering all on a regulated model, provides limited downside risks within the volatile power sector environment. Thus, it always remains a favorite candidate for disinvestment for the GOI. Risks do pertain to PAF and ROEs moderation. However, it has bottomed-out according to our expectations. At 1.3x FY15E, with zero-balance sheet problems, the stock offers a defensive play within the sector. Maintain 'Accumulate'.

Source : Equity Bulls

Keywords