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NTPC
F2Q11: Weak Operating
Results
Quick Comment – Impact on our views: NTPC
reported F2Q11 income of Rs131.7bn (up 17% YoY),
EBITDA of Rs34bn (down 9% YoY), and reported profit
of Rs21bn (down 2% YoY). Adjusted profit (primarily for
expenses, higher taxes, and prior period sales) was
about Rs18.5bn (down 16% YoY). We believe key
reasons for the lower profitability are: 1) the company
now grosses up ROE with the MAT rate as against the
full tax rate in F2010; 2) lower other income as the yield
on funds has reduced; and 3) lower generation, which
may have resulted in lower income from incentives
(availability linked and UI charges) and efficiency-linked
gains.
What's new: The company’s total capacity at the end of
September 2010 was 32,694 MW (including 3,364 MW
of joint venture capacity) and it plans to add another
3,160 MW in F2H11. NTPC is trying to sign PPAs for a
total of 75 GW before January 2011, by which point
competitive bidding may become mandatory. As of now,
the company has already signed PPAs for 62 GW. On
overseas coal mine acquisitions, the company continues
to negotiate with various companies who want to sell
part of their equity and said it hopes to acquire
something in the next three to six months. Other key
highlights from the conference call are on page 2.
Investment thesis: We estimate NTPC to have a
capacity of 45,334 MW (including joint venture capacity)
by F2012. We believe it will be key for the company to
ensure timely completion of its projects as any delays
would be negative for the stock. At the same time, we
believe that NTPC’s regulated business model will
provide a high degree of visibility on the company’s
future profitability. The stock trades at 2.4x P/B with a
dividend yield of 2.4% on our F2011 estimates and
hence we maintain an Equal-weight rating on the stock.
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