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A beat finally
ƒ Results beat our toned down expectations
ƒGeneration slightly below our estimates, but pricing better
ƒWe expect near-term outperformance in a volatile market
ƒ DCF-based TP of INR200.00
Results exceed expectations NTPC’s 3QFY11 adjusted EPS of
INR2.44 beat our estimate of INR2.53 by 13.5%. EBITDA of INR32.2b beat our
estimate by 7.6%, as NTPC earned an EBITDA/kwh of INR0.59 – about 10%
higher than our estimate of INR0.53.
Adjusted sales of INR128.8b were 2.9% below our estimate, but this was on
account of power generation coming in slightly below our estimate and lowerthan-expected costs (costs are a passthrough for NTPC). The EPS beat was also aided by lower-than-expected depreciation and interest expenses and higher-than-expected other income.
Near-term outperformance likely
As markets have turned volatile, the stock has outperformed the MSCI
India index by 8% over the past three months after a period of prolonged
underperformance. We believe NTPC’s better-than-expected 3QFY11
results and the market’s perception of it being a defensive stock will likely
aid outperformance as long as the markets remain volatile. Long term,
we think upside would only come if NTPC adds power-generation
capacity on time and is able to rein in fuel costs by starting production
from its captive coal mines. Our estimates are below consensus as we
assume lower utilization rates (70%) for NTPC's non-pithead plants on
our concern that NTPC’s fuel costs would rise significantly as it imports
more coal to overcome coal shortages due to inadequate supplies from
Coal India (COAL IN, Not rated). The higher fuel costs would
disadvantage NTPC’s non-pithead power plants under merit order
dispatch rules. Our DCF-based TP of INR 200.00 is based on a WACC of
11.4%, assuming cost of equity of 13.1%, cost of debt of 8%, a tax rate of
30% and a D:E ratio of 23:77. We will review our estimates and
valuations post NTPC’s earnings conference call to be held at 4:30 pm
IST on 1 February 2011.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
A beat finally
ƒ Results beat our toned down expectations
ƒGeneration slightly below our estimates, but pricing better
ƒWe expect near-term outperformance in a volatile market
ƒ DCF-based TP of INR200.00
Results exceed expectations NTPC’s 3QFY11 adjusted EPS of
INR2.44 beat our estimate of INR2.53 by 13.5%. EBITDA of INR32.2b beat our
estimate by 7.6%, as NTPC earned an EBITDA/kwh of INR0.59 – about 10%
higher than our estimate of INR0.53.
Adjusted sales of INR128.8b were 2.9% below our estimate, but this was on
account of power generation coming in slightly below our estimate and lowerthan-expected costs (costs are a passthrough for NTPC). The EPS beat was also aided by lower-than-expected depreciation and interest expenses and higher-than-expected other income.
Near-term outperformance likely
As markets have turned volatile, the stock has outperformed the MSCI
India index by 8% over the past three months after a period of prolonged
underperformance. We believe NTPC’s better-than-expected 3QFY11
results and the market’s perception of it being a defensive stock will likely
aid outperformance as long as the markets remain volatile. Long term,
we think upside would only come if NTPC adds power-generation
capacity on time and is able to rein in fuel costs by starting production
from its captive coal mines. Our estimates are below consensus as we
assume lower utilization rates (70%) for NTPC's non-pithead plants on
our concern that NTPC’s fuel costs would rise significantly as it imports
more coal to overcome coal shortages due to inadequate supplies from
Coal India (COAL IN, Not rated). The higher fuel costs would
disadvantage NTPC’s non-pithead power plants under merit order
dispatch rules. Our DCF-based TP of INR 200.00 is based on a WACC of
11.4%, assuming cost of equity of 13.1%, cost of debt of 8%, a tax rate of
30% and a D:E ratio of 23:77. We will review our estimates and
valuations post NTPC’s earnings conference call to be held at 4:30 pm
IST on 1 February 2011.
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