NTPC - Sep-q PAT adjusted for non-recurring items weak:: JPMorgan

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NTPC Neutral
NTPC.BO, NATP IN
Sep-q PAT adjusted for non-recurring items weak


• Reported PAT of Rs21.1B (down 2.1% YoY) included ~Rs3.4B of
non-recurring income, in our view. Adjusted PAT of Rs17.65B (down
4.2% QoQ, 18% YoY) was broadly in line with our est. (Rs17.5B) and
much below consensus (Rs20.6B).
• Operating performance weak. Generation was up 3.75% YoY despite
the addition of ~1GW since Sep-q last year. As expected, generation has
actually dipped 6.2% QoQ. Our out of consensus PAT estimate reflected
under-recovery of fixed charges due to low PLF.
• Key non-recurring adjustments to PAT in 2QFY11 results include-
(1) Rs10.21B of prior period depreciation written back during the
quarter (one-time). For certain assets NTPC switched to lower
depreciation rates as notified by CERC vs. Company's act in Sep-q, (2)
Rs7.42B Advance against depreciation recognized as prior period sales
during Sep-q (nil in Jun-q) vs. Rs3.2B during FY10. Total deferred
revenue on account of AAD in balance sheet at end of Sep-q is Rs8.14B

to be recognized as income during future quarters. The extent of recovery
of AAD in Sep-q makes ~Rs5.8B non-recurring in our view (assuming
FY10 rate of booking AAD prior period income was followed), (3)
Rs12.6B debtor related provisions expensed in P&L (vs. Rs1.09B in
FY10). We subtract non-recurring prior period income
(=Rs10.2B+Rs5.8B) and add back debtor provisions (Rs12.6B) to arrive
at recurring PAT of Rs17.65B.
• The analyst conference call is scheduled at 4PM today (Dial in: +91 22
3065 0107) where we expect to get further details on operational
performance and taxes during the quarter.