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During 2QFY2011, NTPC’s adjusted net profit declined by 17.8% yoy to
`1,845cr, which was in line with our estimates. During the quarter, bottom-line
performance was affected by under recovery of fixed costs in new plants, lower
other income due to lower interest rates and reduction in tax saving bonds.
We maintain Accumulate on the stock with a Target Price of `230.
to `13,350cr in 2QFY2011, primarily driven by higher realisations as Energy Sent
Out (ESO) grew by modest 3.5%, despite the 1,480MW capacity addition since
2QFY2010. Power generation during the quarter was affected by fuel supply
issues, maintenance-related shutdown and backdown of plants due to monsoons.
OPM fell by 748bp yoy to 25.3% due to higher fuel costs and other expenses.
NTPC’s reported net profit was down by 2% yoy to `2,107cr. During the quarter,
the company benefitted from extraordinary income of `1,763cr due to the
write-back of depreciation and advance against depreciation (AAD)
recognised as prior-period sale, which boosted its bottom line. However, the
company also made a provision of `1,263cr with respect to sundry debtors,
which impacted its bottom line.
Valuation: At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and
2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its
regulated business model, with an assured return on equity (RoE) and strong cash
flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E
estimates to arrive at a Target Price of `230. We maintain Accumulate on
the stock.
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