1. For 1QFY2014, NTPC's net profit was in line with expectations at Rs. 2,527 crore, though revenue declined 2.2% year-over-year to Rs. 15,613 crore.
2. Operational performance declined as gross generation fell 3.2% to 57 billion units due to grid restrictions and fuel supply constraints.
3. NTPC received 34.6 million tonnes of domestic coal, up 2.4% year-over-year, and imported 3.8 million tonnes of coal, up 35.7% year-over-year to address domestic shortages.
1. For 1QFY2014, NTPC's net profit was in line with expectations at Rs. 2,527 crore, though revenue declined 2.2% year-over-year to Rs. 15,613 crore.
2. Operational performance declined as gross generation fell 3.2% to 57 billion units due to grid restrictions and fuel supply constraints.
3. NTPC received 34.6 million tonnes of domestic coal, up 2.4% year-over-year, and imported 3.8 million tonnes of coal, up 35.7% year-over-year to address domestic shortages.
1. For 1QFY2014, NTPC's net profit was in line with expectations at Rs. 2,527 crore, though revenue declined 2.2% year-over-year to Rs. 15,613 crore.
2. Operational performance declined as gross generation fell 3.2% to 57 billion units due to grid restrictions and fuel supply constraints.
3. NTPC received 34.6 million tonnes of domestic coal, up 2.4% year-over-year, and imported 3.8 million tonnes of coal, up 35.7% year-over-year to address domestic shortages.
1. For 1QFY2014, NTPC's net profit was in line with expectations at Rs. 2,527 crore, though revenue declined 2.2% year-over-year to Rs. 15,613 crore.
2. Operational performance declined as gross generation fell 3.2% to 57 billion units due to grid restrictions and fuel supply constraints.
3. NTPC received 34.6 million tonnes of domestic coal, up 2.4% year-over-year, and imported 3.8 million tonnes of coal, up 35.7% year-over-year to address domestic shortages.
BUY CMP Target Price Investment Period Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Power 107,150 41,309 0.8 175/127 343,396 10 19,164 5,678 NTPC.BO NTPC@IN
`130 `163 12 months
Source: Company, Angel Research
For 1QFY2014, NTPCs net profit was in line with our expectation, coming in flat yoy at `2,527cr (our expectation was of `2,515cr). However, revenue was below our estimate, declining by 2.2% yoy to `15,613cr (compared to our expectation of `16,519cr). Generation revenues fell by 3.0% yoy to `15,711cr as power generation declined by 3.2% yoy to 57.0bn units and average power tariff remained subdued at `2.92/unit. Operational performance: NTPC reported a lower PAF yoy at 84.8% (88.4% in 1QFY2013) for coal-based plants, whereas the PAF for gas based plants was higher yoy at 94.4% (92.6% in 1QFY2013). Gross generation for the quarter was down yoy at 57.0bn units on account of losses due to grid restriction (7.8bn units in 1QFY2014 vs 3.5bn units in 1QFY13) and fuel supply constraints (4.8bn units in 1QFY2014 vs 1.2bn units in 1QFY13). It led to 733bp yoy contraction in PLF of coal based stations to 79.1%. Fuel supply: NTPC received 34.6mn tonne (mt) of domestic coal in 1QFY2014 as against 33.8mt in 1QFY2013, an increase of 2.4% yoy. The company also ramped up procurement of imported coal by 35.7% yoy to 3.8mt during the quarter from 2.7mt in 1QFY2013, to bridge the shortfall of domestic coal. NTPC requires 178mt of coal in FY2014, out of which 81% is expected to be procured from Coal India Ltd, 16% through imports and the rest through E-auctions and captive mines. Meanwhile, NTPC consumed 7.9mmscmd gas in 1QFY2014 (13.1mmscmd in 1QFY2013), a decline of 39.4% yoy on account of unavailability of gas. Outlook and valuation: We expect NTPC to register a CAGR of 12.9% in its topline on back of robust capacity addition plans. The stock is currently trading at 1.2x FY2014E and 1.1x FY2015E P/BV. Considering NTPCs regulated equity model, assured fuel supply and robust capacity addition plans, , we recommend Buy on the stock with a target price of `163. Key financials (Consolidated) Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2012 64,958 12.8 9,813 27.6 21.8 11.9 10.9 1.4 13.5 8.7 2.4 11.1 FY2013 67,953 4.6 12,591 28.3 24.7 13.4 9.7 1.3 13.9 9.1 2.5 10.1 FY2014E 76,734 12.9 11,039 (12.3) 24.5 13.4 9.7 1.2 12.8 9.0 2.4 9.6 FY2015E 86,680 13.0 11,933 8.1 24.3 14.5 9.0 1.1 12.7 9.0 2.2 9.1
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 75.0 9.9 10.3 4.8
Source: Company, Angel Research; Note: CMP as of August 2, 2013
Please refer to important disclosures at the end of this report
NTPC | 1QFY2014 Result Update
Exhibit 1: Quarterly Performance (Standalone)
Y/E March (` cr) Net Sales Fuel Cost (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM EPS (`) Adjusted PAT Source: Company, Angel Research
(` cr) Net Sales Operating Profit OPM (%) Adj. Net Profit Source: Company, Angel Research
Actual 15,613 4,265 27.3 2,527
Estimates 16,519 3,981 24.1 2,516
Variation (%) (5.5) 7.1 322bp 0.5
August 3, 2013
NTPC | 1QFY2014 Result Update
Operational highlights NTPC reported a PAF of 84.8% and 94.4% during the quarter for coal and gas-based plants respectively. Gross generation for the quarter was down yoy at 57.0bn units on account of losses due to grid restriction (7.8bn units in 1QFY2014 vs 3.5bn units in 1QFY2013) and fuel supply constraints (4.8bn units in 1QFY2014 vs 1.2bn units in 1QFY2013). It led to a 733bp yoy contraction in PLF of coal based stations to 79.1%.
Exhibit 3: Operational performance
250 200 150 (BU)
91 89 88 88 92
91
88
85
83
94 90 86 82 78 (%)
100 50 159 171 189 201 207 219 221 222 232
79
57
74
FY05
FY06
FY07
FY08
FY09 Generation
FY10
FY11 PLF (RHS)
FY12
FY13 1QFY14
Source: Company, Angel Research
Fuel supply NTPC received 34.6mt of domestic coal in 1QFY2014 as against 33.8mt in 1QFY2013, an increase of 2.4% yoy. The company also ramped up procurement of imported coal by 35.7% yoy to 3.8mt in the quarter from 2.7mt in 1QFY2013, to bridge the shortfall of domestic coal. NTPC requires 178mt of coal in FY2014, out of which 81% is expected to be procured from Coal India, 16% through imports and the rest through E-auctions and captive mines. Meanwhile, NTPC consumed 7.9mmscmd gas in 1QFY2014 (13.1mmscmd in 1QFY2013), a decline of 39.4% yoy on account of unavailability of gas.
Capital Expenditure Capex totaling to `2,880cr was incurred in 1QFY2014 by NTPC and its group companies of which `2,145cr was by NTPC alone. NTPC has further planned a capex of `20,200cr for FY2014 (vs `19,925cr in FY2013).
August 3, 2013
NTPC | 1QFY2014 Result Update
Management Meet Takeaways
Fuel Security: NTPC has signed fuel supply agreements (FSA) for 75% of its total capacity under pre-2009 FSA and rest under post-2009 FSA and linkages. Shortage in domestic coal will force NTPC to increase procurement of imported coal. However, NTPC also expects its captive coal mines to commence production in FY2014 itself and support PLF of existing capacities. Existing coal mines: NTPC has incurred a cumulative capex of `1,536cr till 1QFY2014 to develop the six coal mine blocks allotted it. Pakri Barwadih and Chatti Bariatu have already obtained all the clearances while Talaipalli and Kerandari are expected to get clearances soon. However, Dulanga may take time as it is still in initial stages. These six blocks have estimated coal reserves of over 3bt. The Management has targeted 33mt production by FY2017. New coal mines allotted: NTPC has been further allotted another four coal mining blocks at Banai (Chhatisgarh), Bhalmuda (Chattisgarh), Chanrabila (Odisha), and Kudanali-Laburi (Odisha) with estimated coal reserves of 2bt. Entire power output tied-up: NTPC does not sell any power in the merchant market and has tied up its entire capacity under PPA agreement, which implies assured offtake and immunity to volatile merchant prices. Further, these PPAs allow fuel pass-through, which protects NTPC from any volatility in fuel prices. High collection efficiency: NTPC continues to realize 100% of its dues from SEBs. Further, payment security mechanism such as LC coverage and agreements for first charge over state utilities receivables mitigates payment default risk.
August 3, 2013
NTPC | 1QFY2014 Result Update
Investment arguments Capacity addition to drive future growth: Going forward, NTPCs growth is expected to be driven by the huge capacity addition planned by it. It has already added 4,170MW capacity in FY2013 and plans to add another 1875MW in FY2014. In all, the company targets to add ~14,020MW of capacity (excluding renewable energy projects) in the Twelfth Plan (FY2012-17). Earnings protected by the regulated return model: NTPC, being a central public utility, is governed by the regulated return model. The CERCs regulations for FY2010-14 provide RoE of 15.5% on regulated equity. As per regulations, fuel costs are a pass-through, which protect the company from cost pressures due to increased fuel costs. NTPC has its overall output tied up under the long-term PPA route (regulated returns), which ensures power offtake and stable cash flows thereof.
Outlook and valuation
We expect NTPC to register capacity addition plans. The FY2015E P/BV. Considering and robust capacity addition price of `163. a CAGR of 12.9% in its top-line on back of robust stock is currently trading at 1.2x FY2014E and 1.1x NTPCs regulated equity model, assured fuel supply plans, we recommend Buy on the stock with a target
Company Background Established in 1975, NTPC is India's largest power generation company. NTPC Group has an installed capacity of 41,184MW (including 5,364MW under JVs), spread across 32 power stations. The company's capacity has grown by 4,170MW over FY2013. The company envisions being a 1,28,000MW company by FY2025. NTPC enjoys healthy operational efficiency and has consistently reported high PLF of ~85% and above, compared to all-India PLF of ~70%.
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
August 3, 2013
NTPC | 1QFY2014 Result Update
Balance Sheet (Consolidated)
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Other long term liablities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Other non CA Total Assets previous year numbers
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
August 3, 2013
NTPC | 1QFY2014 Result Update
Cash flow statement (Consolidated)
Y/E March (` cr) Profit before tax Depreciation Chg in WC & other adj. Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances previous year numbers
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
NTPC No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
