NTPC Limited - Steady state - 1QFY14 Results Review - Antique

NTPC reported 1QFY14 revenue and earnings of INR156.6bn and INR25.3bn respectively. We estimate adjusted PAT of INR23.4bn, a decline of 1% YoY. Profitability has been lower due to 3% YoY decline in electricity generation (down from 58.8bn in 1QFY13 to 57bn in 1QFY14) and lower PAF leading to lower incentives. Lower generation at 79% PLF was mainly due to backdowns by Discoms on account of a good hydro season and scheduled power cuts taken due to financial stress.

Fuel cost per unit has decreased 8% YoY from INR1.8/kWh in 1QFY13 to INR1.65/kWh in 1QFY14 as INR35bn has not been booked in both sales and fuel costs due to dispute over payment to Coal India (issue over change in basis of payment from UHV to GCV).

Valuation, maintain BUY

We expect the company to add 1.5GW/2GW in FY14e/FY15e. We have estimated coal based PAF for FY14e/FY15e at 90%/92% we expect the coal imports to increase with easing of coal transportation bottlenecks especially at Farakka and Kahalgaon. Given the uncertainty of coal for most of the generating assets, we believe NTPC remains one of the favoured entities to receive domestic coal and higher imports can pull up earnings significantly. Maintain BUY with a target price of INR185/sh.

Source : Equity Bulls

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