NTPC Equity Research

19th March, 2011
Stocks.microviews.org
Long term: BUY
NTPC Ltd.
Short Term : HOLD
High Operational Efficiency to Drive Growth
Price: Rs. 174
Investment Rationale
Target Price: Rs. 208
Operational Performance
NTPC has consistently delivering power at one of the cheapest
rates, primarily because of its high operational efficiency. It has
maintained a Plant Load Factor >90%, better is than the
industry average and comparable to its peers.
Q3 Earnings consolidated
Overall generation for Q3 of FY11 stood at 54.7BUs, an
increase of 4.8% Q-o-Q. However, its operational efficiency
dropped compared to last quarter. The Plant Load Factor for
coal stations stood at 87.2% compared to 90.54% in the Q3 last
year. While for gas plant its PLF was 71.5% in Q3FY11
compared to 76.8% in same quarter last year.
Securing assured Fuel Supply
Applying multiple strategies to secure fuel supplies for both
Coal as well as Gas fired power plants. NTPC is also engaging
itself into the gas value chain. It has also entered into long term
contacts with Coal India to assure supplies at its power plants.
Capacity Expansion on war foot
Market Report
BSE Code
Market cap.
52 Week High
52 Week low
Short-term Stock return (%)
Short-term Market return (%)
Long-term Stock return (%)
Long-term Market return (%)
200 Days Price Average
50 Days Price Average
6 Month Change
532555
Rs.1455Bn
Rs.222.2
Rs.168.6
(1.71)
(7.7)
1.69
10.0
192.8
178.3
(29.8)
NTPC is poised to become a 75,000 Mw company by 2017, by

increasing its capacity by more than 100%. Most of its projects
have been accorded land, water, fuel and environmental
clearances, providing glitch free route to capacity expansion.
Key Risk to our Estimates

Uncertainty in capacity Expansion
Against the planned expansion of 1660 Mw in Q4FY11, little
has been done till now. Lacklustre in project implementation
may lead to revising our estimates pertaining to profitability,
which may further curtail capacity expansion target (13%
CAGR).
Shashank, [email protected]
Page 1
Peer Comparison
Profitability Comparison
PE Ratio
EPS
ROE
3%
ShareHolding Pattern
2% 2%
8%
Govt. of India
Banks
FIIs
85%
Individuals
Others
Reliance
Power
106.23
1.14
1.94
TATA
Power
30.78
39.93
8.99
JSW
Energy
14.41
5.16
15.77
NTPC
16.06
10.59
13.69
Adani
Power
151.06
0.78
2.94
When comparing NTPC with its peers in power sector, we find

its profitability among best in class. It has a high ROE of 13.69,
suggesting its ability to generate handsome profits when
compared to its peers. Moreover, NTPC seems to be
undervalued to some extent because of its PE ratio being lower
than the industry average of 19.37.
NTPC has been performing relatively better than its peers in
almost all profitability ratios.
Operational Efficiency Comparison
PL Factor
AV Factor
Reliance
Power
92
-
TATA JSW
Power Energy
73
91
91
-
NTPC
91.1
91.4
Adani
Power
93
98
In spite of its greater size, NTPC has performed outstanding in

both operational parameters.
Key Financials
Exhibit 1: Key Financials
FY'06
Revenue
267292
EBITDA
104196
PAT
58202
EPS
7.1
Equity Dividend 28.00%
Book Value
54.53
FY'07
326317
128422
68647
8.3
32.00%
58.94
FY'08
370910
141915
74148
9.0
35.00%
63.84
FY'09
419752
137217
82013
10.0
36.00%
69.58
FY'10
463777
153445
87282
10.6
38.00%
75.72
FY'11F
FY'12F
FY'13F
524068 592196.9 669182.4
177693.3 198039.4 220913.1
106624.7 120787.7 136543.4
15.7
19.2
23.5
41.05%
44.34%
47.89%
87.27
100.42
115.36
Page 2
Valuation Summary
Valuating NTPC standalone at a discount rate of 13%, we arrive
at a share price of Rs. 202 using the FCFF model.
Exhibit 2: Valuation using SOTP
Subsidiary
NTPC Electric Supply Company Ltd.
NTPC Hydo Ltd.
NTPC Vidyut Vyapar Nigam Ltd.
Katni Bijlee Utpadan Nigam Ltd.
Bharatiya Rail Bijlee Company Ltd.
Stake(%) Value of Firm NTPC's stake Value per Share Rationale

100.00%
493.8
888.84
0.32
1.8
100.00%
1025.5
1948.45
0.70
1.9
100.00%
962.8
1733.04
0.62
1.8
64.57%
2803
3438.80
1.23
1.9
74.00%
5461.5
8891.32
3.19
2.2
Total Value of Subsidiaries
Value of NTPC Standalone
Total Value of NTPC Ltd.
6.07
202.00
208.07
With a valuation of Rs. 208, NTPC shares are undervalued and

are expected to achieve its intrinsic value by year end when
capacity ramp up start showing results.
Conclusion
NTPC is showing strong growth potential with its upcoming
projects nearing to completion, thereby adding major streams
of revenue. However, its current performance when compared
to the industry trend is at par. So, we rate NTPC Ltd. as HOLD in
the short term and BUY for long term investment.
Page 3
Financial Summary
Exhibit3: Financial Summary
Income Statement (in Rs. Mn.)

Gross Sales
Less: Excise Duty
Net Sales
EXPENDITURE :
Increase/Decrease in Stock
Power Generation & Distribution Cost
Employee Cost
Operation Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Expenses Capitalised
Total Expenditure
EBIDTA (Excl Other Income)
Other Income
EBITDA
Interest
EBDT
Depreciation
Profit Before Tax
Provision for Tax
Profit after Tax
Adj to Profit After Tax
Profit Balance B/F
Appropriations
Equity Dividend (%)
Earnings Per Share (Rs.)
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11F Mar-12F Mar-13F

269049 328173 373024 421968 466236 526847 595337 672731
1757
1856
2114
2216
2459
2779
3140
3548
267292 326317 370910 419752 463777 524068 592197 669182
0
164172
9674
7349
4349
141
4242
0
189927
77365
26831
104196
17632
86564
20477
66087
7885
58202
18
812
59032
28.00%
7.06
0
198281
11625
8655
5013
205
1920
0
225699
100618
27804
128422
18594
109828
20754
89074
20427
68647
1272
752
70671
32.00%
8.33
0
220407
18948
9429
5844
166
6678
0
261472
109438
32477
141915
17981
123934
21385
102549
28401
74148
1750
899
76797
35.00%
8.99
0
271476
24617
9923
6273
170
8148
0
320607
99145
38072
137217
19977
117240
23645
93595
11582
82013
1250
211
83474
36.00%
9.95
0
294922
24098
11446
8107
194
1784
0
340551
123226
30219
153445
18089
135356
26501
108855
21573
87282
2000
151
89433
38.00%
10.59
0
324790
24475
13391
8366
254
6605
0
377881
146187
31506
177693
16407
161286
29731
131555
24930
106625
0
0
106625
41.05%
15.71
0
367013
27657
15132
9453
287
7464
0
427005
165192
32848
198039
15414
182626
33596
149029
28242
120788
0
0
120788
44.34%
19.22
0
414724
31252
17099
10682
325
8434
0
482516
186667
34246
220913
14480
206433
37964
168469
31925
136543
0
0
136543
47.89%
23.47
Page 4
Financial Summary(Contd.)
Exhibit 4: Financial Summary(Cont.)
Balance Sheet (in Rs. Mn.)

Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11F Mar-12F Mar-13F
SOURCES OF FUNDS
Share Capital
Share Warrants & Outstandings
Total Reserve
Shareholder's Funds
Secured Loans
Unsecured Loans
Total Debts
TOTAL LIABILITIES
APPLICATION OF FUNDS
Gross Block
Capital Work-in Progress
Construction Stores & Advances
Less: Accumulated Depreciation
Less: Impairment of Assets
Net Block
Investments
Current Assets, Loans & Advances
Inventories
Sundry Debtors
Cash and Bank
Other Current Assets
Loans and Advances
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
Net Current Assets
Miscellaneous Expenses
Deferred Tax Assets / Liabilities
TOTAL ASSETS
82455
0
367132
449587
57327
149054
206381
655968
82455
0
403513
485968
68229
183182
251411
737379
82455
0
443931
526386
73147
215047
288194
814580
82455
82455
82455
82455
82455
0
0
0
0
0
491246 541920 637108 745542 868741
573701 624375 719563 827997 951196
89696
90799 102603 115941 131014
281964 303890 319722 331873 346540
371660 394689 422325 447814 477553
945361 1019064 1141888 1275811 1428749
460396
103999
32341
229501
0
367235
192891
507273
128567
39825
250792
0
424873
160943
533680
184389
40394
272743
0
485720
152672
623530
212211
51838
294153
0
593426
139835
23405
8678
84714
10834
54717
182348
49102
37403
86505
95843
0
-1
655968
25102
12523
133146
11824
76336
258931
53235
54132
107367
151564
0
-1
737379
26757
29827
149332
10475
88887
305278
55483
73606
129089
176189
0
-1
814580
32434
33477
40466
45727
51672
35842
66514
39836
45015
50867
162716 144595 191494 216388 244519
22887
17153
20598
23276
26301
99842 120728 123309 139339 157453
353721 382467 415703 469745 530812
74391
76876
87982
99420 112344
67229 101162
92504 104530 118118
141620 178038 180486 203949 230463
212101 204429 235217 265796 300349
0
0
0
0
0
-1
-2092
0
0
0
945361 1019064 1141888 1275811 1428749
668501
267624
53419
320888
0
668656
148071
755406
302415
60363
350619
0
767565
139105
853609 964578
341729 386154
68211
77078
384216 422180
0
0
879333 1005631
130682 122769
Page 5

NTPC Equity Research

Uploaded by

Copyright:

Available Formats

NTPC Equity Research

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

NTPC Equity Research

Uploaded by

Copyright:

Available Formats

19th March, 2011

Long term: BUY

Short Term : HOLD

High Operational Efficiency to Drive Growth

Price: Rs. 174

Target Price: Rs. 208

NTPC is poised to become a 75,000 Mw company by 2017, by

Key Risk to our Estimates

When comparing NTPC with its peers in power sector, we find

In spite of its greater size, NTPC has performed outstanding in

Stake(%) Value of Firm NTPC's stake Value per Share Rationale

With a valuation of Rs. 208, NTPC shares are undervalued and

Exhibit3: Financial Summary

Income Statement (in Rs. Mn.)

Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11F Mar-12F Mar-13F

Exhibit 4: Financial Summary(Cont.)

Balance Sheet (in Rs. Mn.)

You might also like