NTPC - Operationally strong; green commitments on track - ICICI Securities

NTPC has continued to reported strong operational numbers in Q3FY21 on the back of power demand recovery. While reported standalone/consolidated PAT was Rs33.1bn / Rs38.8bn, up 10.7%/21.2 YoY, adjusted PAT was Rs33.1bn/Rs39bn, up 23.6%/35.5% YoY respectively. With 9MFY21 consolidated adjusted profit at Rs116.8bn, up 24% YoY, NTPC is expected to register 15% earnings CAGR over FY20-FY23E. Its green commitments remain on track with 1.4GW operational, 2.7GW under implementation and 1.4GW under tendering. In addition, it has won 1.3GW in recent bids and is participating in the upcoming 5GW IREDA CPSU auction (expected by Mar'21). Overdue receivables declined by Rs25bn QoQ and a further Rs10bn in Jan'21 to Rs157bn (expect further Rs80bn reduction by Mar'21). NTPC announced an interim dividend of Rs3/share. Maintain BUY with an unchanged target price of Rs165/sh.

- Operational profitability remains high: On standalone/consolidated basis, reported PAT in Q3FY21 was Rs33.1bn/Rs38.8, up 10.7%/21.2% YoY, while adjusted PAT was Rs33.1bn/Rs39bn, up 23.6%/35.5% YoY, respectively. Adjusted consolidated profit was higher YoY mainly due to the contribution from THDC and NEEPCO, acquired in Mar'20. Consolidated/ standalone revenues for the quarter was Rs245.1bn/Rs275.3bn, up 4.3%/8.3% YoY, while EBITDA was Rs73.7bn/Rs87.4bn, up 5.6%/15.1%. Other income was lower since the late payment surcharge has been booked at 1% p.m. as per the CERC directive. Regulated equity was up 14.5% YoY at Rs648bn (Rs618bn at FY20-end). Standalone/group gross generation in Q3FY21 was 65.4BU/76.5BU, up 6.9%/11.1% YoY. Coal PAF was at 89.1% vs 88.3% in Q3FY20. Average tariff was slightly higher at Rs3.87/unit which is expected to reduce as PLF picks up.

- Dividend announced: NTPC announced a dividend of Rs3/share. It expects to continue paying higher of 30% of PAT or 5% of net worth as annual dividend going forward.

- On path to being a cleaner and greener company: We believe NTPC is taking huge strides to transform itself into a company with cleaner coal assets, higher share of renewables and greater focus on all ESG parameters. Currently operational renewable capacity is 1,275MW, 2,754MW is under construction and 1,448MW is under tendering. In FY21, it won 1,360MW of bids - 200MW in Gujarat, 470MW in Rajasthan, 90MW in Kerala, and 600MW in Andhra Pradesh (currently stayed by HC). It will participate in the upcoming 5GW IREDA CPSU scheme. It has also signed MoUs with five states for setting up 17GW at UMREPPs [Gujarat (4.75GW) and Maharashtra (2.64GW) already signed].

- Decoding the quarter for the year ahead: With reported EPS for the standalone / consolidated entity at Rs9.4/Rs10.4 and adjusted EPS at Rs10.7/Rs11.8 in 9MFY21, we believe, NTPC is on course to achieve its FY21 target EPS of Rs12.3/Rs14 (not adjusted for shares extinguished post-buyback). Rs82.2bn increase in standalone regulated equity in TTM plus THDC and NEEPCO addition have resulted in strong core earnings. A robust commissioning pipeline, supported by green initiatives will strengthen core earnings further. Overdue receivables have declined substantially and stood at Rs167bn vs Rs191.6bn at Q2FY21-end and further declined to Rs157bn by Jan'21-end. NTPC expects to receive Rs80bn more through tranche-II of the PFC/REC scheme by Mar'21. Total capacity commercialised till 9MFY21 reached 2,799MW and target for FY21/FY22 is 5,074MW/6GW at group level. Under-recovery was Rs5.7bn as at 9MFY21-end vs Rs5bn at Q2FY21-end. Company expects to close FY21 under-recovery at ~Rs3.5bn.

- Maintain BUY with an unchanged target price of Rs165/share. It is currently trading at FY23E standalone P/BV of 0.7x (P/E of 5.4x) and FY23E consolidated P/E of 4.7x.

Shares of NTPC LTD. was last trading in BSE at Rs.99.65 as compared to the previous close of Rs. 99.05. The total number of shares traded during the day was 1837542 in over 6265 trades.

The stock hit an intraday high of Rs. 101.95 and intraday low of 98.25. The net turnover during the day was Rs. 183968467.

Source : Equity Bulls

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