ntpc - 1qfy2011 result update - 280710

8/8/2019 NTPC - 1QFY2011 Result Update - 280710

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Please refer to important disclosures at the end of this report 1

Y/E March (Rs cr) 1QFY2011 4QFY2010 % chg qoq 1QFY2010 % chg yoy

Net sales 12,944 12,353 4.8 12,003 7.8Operating profit 3,345 3,044 9.9 3,702 ( 9.6)OPM (%) 25.1 23.9 124bp 29.5 (440)bpNet profit 1,842 2,018 (8.7) 2,194 (16.1)

Source: Company, Angel Research

NTPC posted a moderate 7.8% yoy increase in net sales to Rs12,944cr in1QFY2011, driven by lower PLFs recorded in the 1,600MW Farakka (74% in

1QFY2011 vs. 85% in 1QFY2010) 2,340MW Kahalgoan (64% in 1QFY11 vs.74% in 1QFY2010) and 705MW Badarpur plants (79% in 1QFY2011 vs. 92% in1QFY2010). We believe interruptions in coal supply affected power generation inthe Farakka and Kahalgoan plants. During the quarter, sales volume remainedflat at 55.7BU (55.5BU in 1QFY2010) despite the additional 990MW (Dadri490MW and Kahalgoan 500MW) units in operation. We maintain Accumulate onthe stock with a Target Price of Rs230.

Bottom line down 16.1% on higher costs and low incentives: The OPM for thequarter fell by 440bp yoy to 25.1% on account of higher fuel and employeeexpenses, which grew by 12.4% and 15.8%, respectively, on a yoy basis. Lower

PLFs during the quarter also resulted in lower incentives, thereby affectingmargins. Net profit declined by 16% yoy to Rs1,842cr during the quarter.

Valuation: At the CMP of Rs199, the stock is trading at P/BV of 2.4x FY2011E and2.2x FY2012E and at an EV/MW of Rs4.35cr on FY2012E estimates. Consideringits regulated business model, with an assured return on equity and strong cashflow visibility, we have assigned Rs5.25cr EV/MW at and a P/BV of 2.3x onFY2012E estimates to arrive at a Target Price. We maintain Accumulate on thestock.

Key Financials (Consolidated)Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E

Net Sales 44,245 50,188 51,605 58,520% chg 14.5 13.4 2.8 13.4

Net Profits 8,092 8,837 8,024 9,175% chg 8.3 9.2 (9.2) 14.3OPM (%) 23.8 29.9 29.8 30.4EPS (Rs) 9.8 10.7 9.7 11.1P/E (x) 20.3 18.6 20.5 17.9P/BV (x) 2.7 2.6 2.4 2.2RoE (%) 14.2 14.2 12.0 12.8RoCE (%) 8.8 11.7 10.9 11.6

EV/Sales (x) 4.2 3.8 3.8 3.5EV/EBITDA (x) 17.6 12.8 12.6 11.4


ACCUMULATECMP Rs199Target Price Rs230Investment Period 12 Months

Stock Info

Sector Power

Market Cap (Rs cr) 164,429

Beta 0.6

52 Week High / Low 242/190

Avg. Daily Volume 580603

Face Value (Rs) 10

BSE Sensex 17,957

Nifty 5,398

Reuters Code NTPC.BO

Bloomberg Code NATP@IN

Shareholding Pattern (%)

Promoters 84.5

MF / Banks / Indian Fls 10.6

FII / NRIs / OCBs 2.6

Indian Public / Others 2.3

Abs. (%) 3m 1yr 3yr

Sensex 3.3 17.1 17.9

NTPC (3.2) (7.1) 23.6

Rupesh Sankhe022-40403800 Ext:[email protected]

V Srinivasan022-40403800 Ext:[email protected]

NTPC

Performance Highlights

1QFY2011 Result Update | PowerJuly 28, 2010


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NTPC | 1QFY2011 Result Update

July 28, 2010 2

Exhibit 1: 1QFY2011 performance - StandaloneY/E March (Rs cr) 1QFY2011 4QFY2010 % Chg 1QFY2010 % Chg FY2010 FY2009 % Chg

Net Sales 12,944 12,353 4.8 12,003 7.8 46,323 41,924 10.5Other Operating Income 358 378 (5.3) 525 (31.8) 1,899 2,176 (12.7)Total Operating Income 13,303 12,732 4.5 12,528 6.2 48,221 44,099 9.3Fuel Cost 8,702 8,346 4.3 7,743 12.4 29,463 27,111 8.7(% of Sales) 67 68 64 65Staff Costs 684 746 (8.3) 590 15.8 2,412 2,463 (2.1)(% of Sales) 5 6 5 6Other Expenses 572 596 (4.1) 493 15.9 2,027 1,952 3.8(% of Sales) 4 5 4 5Total Expenditure 9,958 9,688 2.8 8,826 12.8 33,902 31,526 7.5Operating Profit 3,345 3,044 9.9 3,702 (9.6) 14,319 12,573 13.9

OPM 25.1 23.9 29.5 30.9 30.0Interest 536 482 11.2 445 20.5 1,809 1,996 (9.4)Depreciation 683 732 (6.8) 613 11.4 2,650 2,364 12.1Other Income 227 250 (9.1) 251 (9.6) 1,025 1,147 (10.6)PBT (excl. Extr. Items) 2,353 2,079 13.2 2,895 (18.7) 10,885 9,359 16.3Extr. Income/(Expense) - -PBT (incl. Extr. Items) 2,353 2,079 13.2 2,895 (18.7) 10,885 9,359 16.3(% of Sales) 18 17 24 23 22Provision for Taxation 511 62 727.5 701 (27.0) 2,157 1,158 86.3(% of PBT) 22 3 20 12

Reported PAT 1,842 2,018(8.7)

2,194(16.1)

8,728 8,2016.4

PATM 14 16 18 19 20Equity Capital 8,245 8,245 8,245 8,245 8,245EPS (Rs) 2.2 2.4 2.7 10.6 9.9Adjusted PAT 1,842 2,018 (8.7) (8.7) 8,728 8,201 6.4


Exhibit 2: 1QFY2011- Actual v/s Angel estimates(Rs cr) Actual Estimates Variation (%)

Net Sales 12,944 13,110 (1.3)Operating Profit 3,345 3,445 (2.9)Net Profit 1,842 2,279 (19.2)



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July 28, 2010 3

Operational Highlights

During the quarter, the companys sales volume remained flat at 55.7BU(55.5BU in 1QFY2010) . PLF of coal-based plants declined to 90.2% in1QFY2011 compared to 92.8% in 1QFY2010. The OPM was also down by 440bpyoy to 25.1% during the quarter.

Exhibit 3: Operational performance


Capacity addition

In 4QFY2010, 490MW of coal-based capacity at Dadri in Uttar Pradesh and the500MW unit at Kahalgoan in Bihar were declared commercial. Currently, the

companys capacity stands at 31,704MW (incl. 2,864MW under the JV), whilecapacity under construction is at 17,830MW. Management has guided that itwould add 4,150MW and 6,500MW of capacity in FY2011E and FY2012E,respectively. On a consolidated basis, the company plans to incur capex ofRs29,000cr during FY2011E and add 4,150MW of capacity during FY2011.

Exhibit 4: Capacity addition planned for FY2011EProject MW

Sipat Stage-I, Unit-I 660Jhajjar, Unit- I &2 1,000

Korba StageIII, Unit -7 500NCTPP StageII, Unit 6 490Simhadri, StageII, Unit- 3&4 1,000Farakka, Stage-III, Unit 6 500Total 4,150


74

78

82

86

90

94

0

50

100

150

200

250

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Generation PLF (RHS)

B U %


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July 28, 2010 5

Outlook and Valuation

India, despite being one of the lowest per capita consumers of power, has anoverall power deficit of 11%. Power demand in the country, which has grown at arate of 6% since FY2003, has continued to outstrip supply. The escalation in powerdemand is expected to be robust going ahead as well, in line with healthy GDPgrowth estimated for the country. Apart from the arising demand from theindustrial front, domestic demand is also expected to pick up, with the Ministry ofPowers ambitious target of achieving per capita consumption of 1,000 units by 2012.

NTPC, the market leader in power generation, has assets of 31,704MW, whichtranslates into a 20% market share of the overall domestic power industry.Moreover, of the 22,300MW capacity that NTPC plans to add during the EleventhPlan Period (FY200712), it has till date managed to add only 4,300MW, whileanother 17,830MW is under construction. Management has proposed capacity expansions of 4,150MW and 6500MW in FY2011E and FY2012E, respectively.

Going forward, we believe NTPCs regulated business model will provide a highrevenue visibility, to the company. However, delays in the completion of its projectswould be a dampener.

At the CMP of Rs199, the stock is trading at a P/BV of 2.4x FY2011E and 2.2xFY2012E and at an EV/MW of Rs4.35cr on FY2012E estimates. Considering itsregulated business model, with an assured RoE and strong cash flow visibility, wehave assigned an EV/MW of Rs5.25cr and a P/BV of 2.3x on FY2012E estimates to

arrive at a Target Price of Rs230. We maintain an Accumulate rating on the stock.

Exhibit 5: Change in estimates(Rs cr) FY2011E FY2012E

Earlier Revised Variation (%) Earlier Revised Variation (%)

Net Sales 52,812 51,605 (2.3) 62,152 58,520 (5.8)Operating Exp 37,089 36,242 (2.3) 43,275 40,746 (5.8)Operating Profit 15,723 15,363 (2.3) 18,877 17,774 (5.8)Depreciation 3,201 3,440 7.5 3,995 4,096 2.5Interest 2,531 2,239 (11.5) 3,004 2,844 (5.3)

PBT 12,938 10,699 (17.3) 14,825 11,849 (20.1)Tax 3,234 2,675 (17.3) 3,233 2,674 (17.3)PAT 9,703 8,024 (17.3) 11,591 9,175 (20.8)

Source: Angel Research


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July 28, 2010 6

Exhibit 6: Key assumptionsEarlier Estimates Revised Estimates

FY11E FY12E FY11E FY12E

Installed Capacity (MW) 35,704 42,204 35,204 41,704Growth (%) 12.6 18.2 11 18.5Sale Volume (BU) 235 249 229 249Growth (%) 8 6 5 9

Realisation (Rs/unit) 2.3 2.3 2.3 2.3Growth (%) 5 3 5 3


Exhibit 7: Angel estimates v/s Bloomberg consensusYear/(Rs) Angel Est. Bloomberg Consensus Var (%) over consensus

FY2011E 9.7 12.2 (20.5)FY2012E 11.1 13.6 (18.4)

Source: Angel Research, Bloomberg

Exhibit 8: Recommendation summary

Company Reco. CMP(Rs)Tgt Price

(Rs)Upside

(%)FY12E

P/BV (x)FY12EP/E (x)

FY2010-12EEPS CAGR (%)

FY12ERoCE (%)

FY12E RoE(%)

CESC Buy 388 470 21.1 1.0 8.4 15.6 9.3 12.5

GIPCL Buy 112 135 20.9 1.2 8.9 33.6 8.3 12.8

NTPC Accumulate 199 230 15.5 2.2 17.9 1.9 11.4 12.7


Exhibit 9: One year forward P/BV Band


60

110

160

210

260

Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

(Share P rice Rs)

Price 1.5X 2X 2.5X 3X


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July 28, 2010 7

Exhibit 10: Premium in NTPC P/E to Sensex P/E


-40

-20

0

20

40

60

80

100

Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10

(

% )

Prem/Disc to Sensex Historic Avg Premium


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July 28, 2010 8

Profit and Loss statement (Consolidated)Y/E March (Rs cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E

Net Operating Income 33,876 38,635 44,245 50,188 51,605 58,520% chg 22.8 14.0 14.5 13.4 2.8 13.4Total Expenditure 23,764 27,222 33,702 35,182 36,242 40,746Net Raw Materials 20,953 22,219 27,347 30,188 30,104 33,844Other Mfg costs 861 3,050 3,823 2,471 3,816 4,327Personnel 1,411 1,953 2,533 2,523 2,322 2,575Other 538 - - - - -EBITDA 10,112 11,413 10,544 15,006 15,363 17,774% chg 30.0 12.9 (7.6) 42.3 2.4 15.7(% of Net Sales) 30 30 24 30 30 30Depreciation&

Amortisation 2,100 2,206 2,495 2,894 3,440 4,096

EBIT 8,012 9,207 8,049 12,112 11,923 13,678% chg 40.3 14.9 (12.6) 50.5 (1.6) 14.7(% of Net Sales) 24 24 18 24 23 23Interest & other Charges 2,010 1,858 2,144 2,078 2,239 2,844Other Income 2,959 3,002 3,402 1,015 1,015 1,015(% of PBT) - - - - - -Share in profit of

Associates - - - - - -

Recurring PBT 8,973 10,351 9,307 11,049 10,699 11,849% chg - - - - - -Extraordinary Expense/(Inc.) 11 - - - - 1PBT (reported) 8,961 10,351 9,307 11,049 10,699 11,848Tax 2,063 2,881 1,215 2,211 2,675 2,674(% of PBT) 23.0 27.8 13.1 20.0 25.0 22.6PAT (reported) 6,898 7,470 8,092 8,837 8,024 9,175ADJ. PAT 6,909 7,470 8,092 8,837 8,024 9,176% chg 5.4 8.1 8.3 9.2 (9.2) 14.4(% of Net Sales) 20.4 19.3 18.3 17.6 15.5 15.7Basic EPS (Rs) 8 9 10 10.7 9.7 11.1Fully Diluted EPS (Rs) 8 9 10 11 9.7 11.1% chg 5.4 8.1 8.3 9.2 (9.2) 14.4


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July 28, 2010 9

Balance Sheet (Consolidated)Y/E March (Rs cr) FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

SOURCES OF FUNDS

Equity Share Capital 8,246 8,246 8,246 8,246 8,246 8,246Preference Capital - - - - - -Reserves& Surplus 41,124 45,991 51,706 55,993 60,717 65,972Shareholders Funds 49,369 54,236 59,951 64,239 68,963 74,218Minority Interest 48 124 166 279 279 279Total Loans 27,020 30,315 38,823 44,210 40,710 51,709Deferred Tax Liability - - - 230 0

Total Liabilities 76,437 84,675 98,940 108,957 109,951 126,205

APPLICATION OF FUNDSGross Block 51,093 55,648 64,742 70,337 86,008 117,040

Less: Acc. Depreciation 25,217 27,487 29,776 32,808 36,248 40,345Net Block 25,877 28,161 34,966 37,529 49,760 76,695Capital Work-in-Progress 20,286 25,630 30,929 38,957 35,263 24,578Goodwill 2 - - 1 1 1Investments 15,143 13,447 11,696 11,778 14,653 14,653Current Assets 26,604 26,346 33,486 33,581 23,826 27,228Cash 13,698 15,361 17,251 16,053 11,017 12,703Loans & Advances 8,902 5,031 9,006 6,549 6,709 7,608Other 4,004 5,954 7,230 10,979 6,100 6,917Current liabilities 11,475 8,908 12,137 12,908 13,787 14,678Net Current Assets 15,129 17,438 21,349 20,672 10,276 10,278Mis. Exp. not written off - - - 20 -

Total Assets 76,437 84,675 98,940 108,957 109,951 126,205


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July 28, 2010 10

Cash flow statementY/E March (Rs cr) FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

Profit before tax 8,961 10,351 9,307 11,049 10,699 11,848Depreciation 2,100 2,206 2,495 2,894 3,440 4,096Change in Working Capital 1,813 2,063 1,367 (825) 5,638 1,555Less: Other income 2,959 3,002 3,402 1,015 1,015 1,015Direct taxes paid 2,063 2,881 1,215 2,211 2,675 2,674Cash Flow from Operations 7,851 8,736 8,553 9,892 16,088 13,812(Inc)/ Decin Fixed Assets (8,661) (9,896) (14,394) (13,623) (11,977) (20,347)(Inc)/ Dec in Investments 3,449 1,696 1,751 (82) (2,875) -(Inc)/ Dec in loans andadvances - - - - - -

Other income 2,959 3,002 3,402 1,015 1,015 1,015Cash Flow from Investing (2,252) (5,198) (9,241) (12,690) (13,837) (19,333)Issue of Equity - - - - - -Inc./(Dec.) in loans 4,540 3,295 8,508 5,387 (3,500) 11,000Dividend Paid (Incl. Tax) 3,038 3,313 3,786 3,786 3,786 3,793Others 2,010 1,858 2,144 - - -Cash Flow from Financing (508) (1,876) 2,578 1,601 (7,286) 7,207Inc./(Dec.) in Cash 5,091 1,662 1,890 (1,197) (5,036) 1,686Opening Cash balances 8,608 13,698 15,361 17,251 16,053 11,017Closing Cash balances 13,698 15,360 17,251 16,053 11,017 12,703


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July 28, 2010 11

Key RatiosY/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

Valuation Ratio (x)P/E (on FDEPS) 23.8 22.0 20.3 18.6 20.5 17.9

P/CEPS 18.3 17.0 15.5 14.0 14.3 12.4

P/BV 3.3 3.0 2.7 2.6 2.4 2.2

Dividend yield (%) 1.8 2.0 2.3 2.3 2.3 2.3

EV/Sales 5.2 4.6 4.2 3.8 3.8 3.5

EV/EBITDA 17.5 15.7 17.6 12.8 12.6 11.4

EV / Total Assets 2.3 2.1 1.9 1.8 1.8 1.6

Per Share Data (Rs)EPS (Basic) 8.4 9.1 9.8 10.7 9.7 11.1

EPS (fully diluted) 8.4 9.1 9.8 10.7 9.7 11.1

Cash EPS 10.9 11.7 12.8 14.2 13.9 16.1DPS 3.7 4.0 4.6 4.6 4.6 4.6

Book Value 59.9 65.8 72.7 77.9 84.0 90.3

Dupont AnalysisEBIT margin 23.7 23.8 18.2 24.1 23.1 23.4

Tax retention ratio 77.0 72.2 86.9 80.0 75.0 77.4

Asset turnover (x) 0.6 0.6 0.6 0.6 0.5 0.6

ROIC (Post-tax) 10.2 10.1 9.3 11.1 9.3 10.0

Cost of Debt (Post Tax) 6.3 4.7 5.4 4.0 4.0 4.8

Leverage (x) 0.3 0.3 0.3 0.4 0.4 0.5

Operating ROE 11.3 11.6 10.513.9 11.7 12.5

Returns (%)ROCE (Pre-tax) 11.1 11.4 8.8 11.7 10.9 11.6

Angel ROIC (Pre-tax) 19.0 21.5 17.1 23.2 20.3 18.0

ROE 14.6 14.4 14.2 14.2 12.0 12.8

Turnover ratios (x) Asset Turnover (GrossBlock) 0.7 0.7 0.7

0.7 0.7 0.6

Inventory / Sales (days) 27.0 25.5 25.5 25.2 26.6 26.6

Receivables (days) 12.7 21.5 28.8 39.6 32.5 14.0

Payables (days) 156.7 136.7 114.0 129.9 134.4 127.5

Working cap cycle(ex-cash) (days) 13.4 16.6 25.5 31.7 13.7 (9.9)

Solvency ratios (x)Net debt to equity 0.3 0.3 0.4 0.4 0.4 0.5

Net debt to EBITDA 1.3 1.3 2.0 1.9 1.9 2.2Interest Coverage (EBIT /Interest) 4.0 5.0 3.8

5.8 5.3 4.8


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July 28 2010 12

Disclosure of Interest Statement NTPC1. Analyst ownership of the stock No2. Angel and its Group companies ownership of the stock Yes3. Angel and its Group companies' Directors ownership of the stock No4. Broking relationship with company covered No

Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

Research Team Tel: 022 - 4040 3800 E-mail: [email protected] Website: www.angeltrade.com

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companiesreferred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits andrisks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, makeinvestment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in thisdocument are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions andtrading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company'sfundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .

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ntpc - 1qfy2011 result update - 280710

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