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NTPC (NTPC) - Qtr. Update - Dtd. - January 21, 2013




Axis Capital Limited


22 Jan 2013





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NTPC’s Q3 adjusted PAT at Rs 24 bn was higher than our estimate of Rs 23 bn due to lower than expected tax outgo (effective tax rate at 25% vs. our estimate of 30%). In Q3, plant availability factor (PAF) improved 330 bps YoY to ~89% while plant load factor (PLF) was flat at ~84% due to low off take by SEBs. Since NTPC earnings are driven by PAF, core RoE improved by ~150 bps to 22.5%. Raise estimates: We revise our FY13 EPS estimate to Rs 11.4 (Rs 10.9 earlier) to factor in lower tax outgo. Note FY14E/FY15E EPS of Rs 11.4/ Rs 12.3 do not factor in tax gains due to gross up of tariff on corporate tax rate vs. MAT (~10% of FY13E earnings). We expect clarity on tax grossing up post budget. Valuation: We introduce FY15 estimates and rollover our SoTP-based TP to FY15. Our TP of Rs 204 factors in sustainable core RoE of 21% and LT growth of 5% vs. 6% earlier as pace of capacity addition is likely to be slow from 2015. Maintain BUY (26% upside from CMP). At CMP of Rs 162, the stock trades at P/E of 14x FY14E EPS of Rs 11.4 and 13x FY15E EPS of Rs 12.3 and P/B of 1.6x FY14E BVPS of Rs 101 and 1.5x FY15E BVPS of Rs 108. Key triggers: (a) SEB reforms leading to higher PLFs, (b) fast track execution, and (c) supply comfort on coal (re-allocation of cancelled coal blocks and new coal blocks via auction). 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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