NTPC Q4FY21 Results Review Report - Strong show in a challenging environment - HDFC Securities

Anuj Upadhyay, Institutional Research Analyst, HDFC Securities

Generation/sales increased 13.7%/13.8% YoY to 77.6bn/72.2bn unit in Q4FY21 on the back of demand recovery. PAF, however, declined in Q4 to 89% vs 94% YoY, but was up at 91.5% in FY21 vs 89.7% YoY. Under-recovery in FY21 came in at INR6bn vs INR2.5 YoY. After adjusting for previous periods and one-off items, adjusted PAT increased by a healthy 31% YoY to INR38.3bn in Q4. Debtors (>45 days) improved to INR65bn vs INR96bn YoY. The company expects to add 5.5GW/6.5GW capacity in FY22/23. For renewables, it now plans to add 60GW capacity by FY32. We expect NTPC's standalone PAT to grow at a 9% CAGR over FY21-23E, led by improvement in PLF, PAF, and regulated equity. The RoE shall expand from 13.2% in FY21 to 13.7% in FY23 and generate an FCF of INR175bn over FY22-23E. We maintain a BUY rating and FY23 P/BV (consolidated) TP of INR 143/share (+25% from the current level). The stock is currently trading at a FY23 standalone P/BV of 0.9x and a PE of 6.5x (consolidated PE of 5.7x).

Strong demand and growth in regulated business boosted PAT: Energy sales increased 13.8% YoY to 72.2bn unit in Q4FY21 due to strong power demand. Coal PAF declined 521bps YoY to 89.1% due to technical overhaul at Darlipalli, Lara, and Kahjalgaon station. Coal PLF, however, rose to 77.1% vs 69.5% YoY. Accordingly, FY21 underrecovery rose to INR6bn vs INR2.5bn YoY. In FY21, coal PAF/PLF came in at 91.4%/66.0% compared to 89.4%/67.8% YoY. Other income increased 62% YoY to INR16.7bn, aided by increased dividend income and LPS income. After adjusting for previous period and one-off items, PAT increased 31% YoY to INR38.3bn in Q4FY21. NTPC also announced a final dividend of INR3.15/share, thus taking the total FY21 dividend to INR6.15/share (40% payout and 5.5% yield).

Doubles renewable target: For FY22E and FY23E, we expect NTPC to commercialise 5.5GW (standalone: 2.9GW, JV: 1.6GW and solar: 1GW) and 6.7GW respectively (standalone: 2.8GW, JV: 1.5GW and solar: 2.4GW). For FY23, we expect capacity addition of 6.7GW (standalone: 2.8GW, JV: 1.4GW and solar: 2.5GW). These projects will increase standlone regulated equity by 21% to INR781bn in FY23E vs. INR648bn in FY21. On the renewable front, management now targets to add 60GW of capacity by FY32 vs 1.1GW in FY21.

Maintain BUY: NTPC is betting big on renewable front by doubling its targeted capacity to 60GW, an effort to scale up its score in ESG metrics. This, along with strong Capex on thermal front, should drive its regulated equity and earnings growth, going ahead (9% CAGR over FY21-23E), which should boost its RoE. We maintain a BUY rating and FY23 P/BV (consolidated) TP of INR 143/share (+25% from the current level). The stock is currently trading at a FY23 standalone P/BV of 0.9x and a P/E of 6.5x (consolidated PE of 5.7x).

Shares of NTPC LTD. was last trading in BSE at Rs.117.95 as compared to the previous close of Rs. 113.55. The total number of shares traded during the day was 2295379 in over 15381 trades.

The stock hit an intraday high of Rs. 118.35 and intraday low of 113. The net turnover during the day was Rs. 267222862.

Source : Equity Bulls

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