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EARNINGS REVIEW
NTPC (NTPC.BO)
Neutral Equity Research
In line with expectations; execution yet to gain momentum; Neutral
What surprised us
NTPC reported 3QFY11 PAT (adjusted for exceptional items) of Rs21.3 bn,
vs our estimate of Rs22 bn and Bloomberg consensus of Rs21.4 bn. The
company added 1000MW of capacity in 3QFY11, with 500MW of Korba
Unit-VII and 500MW of Jhajjar (JV) Unit-I, taking the total installed capacity
addition for FY11E to 1490MW. Despite 3% yoy growth in capacity for
9MFY11, data released by CEA indicate the generation growth was flat yoy
for 3QFY11 and 1.4% yoy for 9MFY11. While management has yet to
confirm the plant availability factor for 3QFY11, we believe the generation
growth was affected by demand on account of low demand schedules for
its gas-based plants.
Though NTPC is best-positioned to manage risks in the form of increasing
fuel costs and domestic coal shortages (we expect the proportion of coal
from captive mines to increase to 9% in FY14E from 2% in FY12E), we
continue to believe capacity addition will be the key driver of its earnings
growth. We expect NTPC to continue missing its guidance of 4.2GW for
FY11E, and we believe NTPC is likely to add only 2.0GW of capacity in
FY11E on commissioning of 500MW Farakka-III project in 4QFY11.
What to do with the stock
We maintain Neutral on NTPC and would wait for more visibility on its
execution before turning positive on the stock. We maintain our EPS
estimates and 12m DCF-based TP of Rs202, which implies potential upside
of 7%; the stock is trading in line with its 5-year historical average on
FY12E P/E and P/B. Key risks: Upside/downside: Commissioning of
capacities earlier or further delays.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
NTPC (NTPC.BO)
Neutral Equity Research
In line with expectations; execution yet to gain momentum; Neutral
What surprised us
NTPC reported 3QFY11 PAT (adjusted for exceptional items) of Rs21.3 bn,
vs our estimate of Rs22 bn and Bloomberg consensus of Rs21.4 bn. The
company added 1000MW of capacity in 3QFY11, with 500MW of Korba
Unit-VII and 500MW of Jhajjar (JV) Unit-I, taking the total installed capacity
addition for FY11E to 1490MW. Despite 3% yoy growth in capacity for
9MFY11, data released by CEA indicate the generation growth was flat yoy
for 3QFY11 and 1.4% yoy for 9MFY11. While management has yet to
confirm the plant availability factor for 3QFY11, we believe the generation
growth was affected by demand on account of low demand schedules for
its gas-based plants.
Though NTPC is best-positioned to manage risks in the form of increasing
fuel costs and domestic coal shortages (we expect the proportion of coal
from captive mines to increase to 9% in FY14E from 2% in FY12E), we
continue to believe capacity addition will be the key driver of its earnings
growth. We expect NTPC to continue missing its guidance of 4.2GW for
FY11E, and we believe NTPC is likely to add only 2.0GW of capacity in
FY11E on commissioning of 500MW Farakka-III project in 4QFY11.
What to do with the stock
We maintain Neutral on NTPC and would wait for more visibility on its
execution before turning positive on the stock. We maintain our EPS
estimates and 12m DCF-based TP of Rs202, which implies potential upside
of 7%; the stock is trading in line with its 5-year historical average on
FY12E P/E and P/B. Key risks: Upside/downside: Commissioning of
capacities earlier or further delays.
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