Analyst Research Report Snapshot

Title:

NTPC (NTPC) - Qtr. Update - Dated - October 26, 2012

Price:

$23.00

Provider:

Axis Capital Limited

Date:

26 Oct 2012

Pages:

3

Type:

AcrobatPDF

Companies referenced:

NTPC.NS

Available for Immediate Download
Summary:

NTPC’s Q2 adjusted PAT at Rs 21 bn was in line with our estimate. Reported PAT of Rs 31.4 bn includes Rs 10.4 bn prior period sales booked in the current quarter. The company surprised positively on execution with CoD (commercial operation) of 2.8 GW in H1. However, commencement of production from captive mines is critical as management expects to meet ~60% of its incremental coal demand over FY12-17 from these mines. Outlook: We believe with private gencos stalling capex due to fuel shortage and unviable PPAs, onus of capacity addition will shift to NTPC. We expect faster clearances for NTPC’s captive coal mines to speed up implementation of its expansion plans. We maintain our estimates, BUY rating and SoTP-based TP of Rs 203 (20% upside). Our TP takes into account long-term sustainable core RoE of 21% and 6% long-term growth. At CMP (Rs 169), the stock trades at 15.5x FY13E EPS of Rs 10.9 and 15x FY14E EPS of Rs 11.4 and 1.8x FY13E BVPS of Rs 89 and 1.7x FY14E BVPS of Rs 95. Key earnings call highlights:  Execution picks up: NTPC added 2.8 GW of commercial capacity during H1 vs. 2.2 GW in FY12. Management has guided for additional 2 GW (including 0.5 GW JV) of commercial capacity addition in H2FY13.  Commencement of captive mine operation critical for fuel security: Management maintained its guidance of starting production from Pakri Barwadih mines (15 MTPA) from CY13. Chatti Bariatu mines (7 MTPA) have received final clearances and are awaiting formal reallocation.  Operational performance impacted by lower imported coal, expect recovery in Q3: Q2 PAF (plant availability factor) was lower at 80% (vs. 83% YoY) due to lower imported coal at 1.5 mn tons in Q2 vs. 4 mn tons YoY. However, PAF recovered to 82% in October due to pick up in imported coal (5 mn tons expected in Q3). Core RoE for Q2 at 20% (up 100 bps YoY). Regards, Bhavin Vithlani (Executive Director – Power & Cap Goods) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1144 Ajay Nandal (AVP – Power) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1120

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