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For 4QFY2011, we expect power-generating companies in our
universe to report top-line growth of 11.6% yoy, driven by
capacity additions and higher tariffs. However, operating profit
is expected to increase at a higher rate of 25.6% yoy. Net profit
is expected to rise by 10.2% yoy.
Capacity addition: Status check
Generation
As of February 2011, 32,762MW of power capacity was
commissioned, that is a mere 54% of the original Eleventh Plan
target. However, we expect the capacity addition to pick-up in
FY2012, being the last year of the plan period. It may be noted
here that inordinate delays in project completion has led to the
CEA revising the Eleventh Plan capacity estimates to 62,488MW,
much below the target of 78,577MW set at the beginning of
the period. Capacity addition has generally been delayed due
to execution issues relating to acquisition of land and obtaining
environment and other statutory clearances. In all, we expect
49,000MW to be added during the plan period.
Transmission lines
During 11MFY2011, 6,697 circuit kilometers (ckm) were added
to the 400kv transmission lines, as against the targeted
12,139ckm for the mentioned period. Total addition to 220kv
transmission lines stood at 5,854ckm, as against the targeted
5,232ckm.
Transmission sub-stations
During 11MFY2011, total addition to the 400kv substation
category stood at 10,635 MW, as against targeted 14,385MW
for the mentioned period. Addition to the 220kv sub-station
category stood at 10,266MW, as against the targeted 9,866MW.
Power-deficit situation
The country continues to face power deficit due to the delay in
commissioning of new capacities, fuel shortage and deficiencies
in the T&D system. India's overall and peak power-deficit levels
during 11MFY2011 stood at 8.6% and 10.3%, respectively,
lower than 9.9% and 12.6% reported in 11MFY2010.
Operational highlights
During 11MFY2011, power generation in India rose by 5.0%
yoy to 729.7BU (695.1BU). Overall, the country's thermal power
generation rose by 3.7% yoy to 601.5BU. The plant load factor
(PLF) of the thermal plants for 11MFY2010 stood at 74.3%,
higher by 238bp than the targeted 72.0%. Hydro power
generation increased by 6.6% yoy to 104.9BU, while nuclear
power generated grew substantially by 39.8% yoy to 23.3BU
during the mentioned period.
Power deficit highest in the Western region
The Western region continues to record the highest power deficit
in the country. During 11MFY2011, the region's power deficit
stood at 13.4%. Maharashtra had overall power deficit of 16.6%
and peak deficit of 21.7%. The Eastern region had the lowest
power deficit of 4.3%, while the peak deficit was 5%.
Coal scenario
Coal
India's coal-based power generation capacity, which currently
stands at 92,418MW, accounts for ~54% of the overall capacity.
The dominance of coal as the fuel for power generation in India
is expected to continue with a major portion of the upcoming
capacity being based on coal. The power sector is the leading
consumer of coal in India, accounting for ~70% of the country's
overall demand in FY2010. As per our estimates, coal demand
by India's power sector would grow by ~280mn tonnes over
the next five years.
Coal-based power plants have been facing fuel shortage on
account of various reasons such as delays in procuring coal
linkages, issues in obtaining environment clearances and other
regulatory approvals for developing coal blocks, hurdles in the
expansion of coal blocks, and logistical and infrastructural
issues. As of February 2011, 32 critical thermal power stations
out of the 82 monitored by the CEA had critical coal stocks for
less than seven days.
Key corporate developments
NTPC
Anushakti Vidhyut Nigam, a JV between NTPC and Nuclear
Power Corporation of India (NPCIL), was incorporated during
the quarter for developing nuclear power projects. While
NPCIL will hold 51% stake, NTPC will hold the balance 49%
of the equity share capital of the company.
Unit-I of the 500MW Indira Gandhi Super Thermal Power
Project at Jhajjar, a JV of NTPC, Haryana Power Generation
Corp., Government of Haryana and Indraprastha Power
Generation Co., was declared commercial in 4QFY2011.
During 4QFY2011, NTPC completed the synchronisation
of Unit-I of the Sipat Super Thermal Power Station
and Unit-VI of the 500MW Farakka Super Thermal Power
Station in West Bengal.
Performance on the bourses
Most power stocks under our coverage underperformed the
Sensex, which lost 5.2% during the quarter. CESC and GIPCL
also fell by 15% and 11.3%, respectively. However, NTPC fell
by only 3.8%.
4QFY2011 expectations
We expect NTPC to record an 8.7% yoy increase in its top line
to `13,835cr for the quarter, aided by volume growth due to
the commencement of new capacities and higher tariffs,
in line with the fuel price hike. The company’s operating profit
is expected to increase by 24.3% yoy to `3,785cr. Net profit for
the quarter is estimated to grow by 9.8% yoy to `2,216cr.
CESC is expected to register 27.3% yoy growth in its standalone
top line to `980cr, aided by higher volumes due to
commissioning of the 250MW Budge-Budge plant. OPM is
expected to expand by 260bp yoy to 28.6%, while net profit is
likely to increase by 37% yoy to `137cr for 4QFY2011.
We expect GIPCL to register a 26.7% yoy increase in revenue in
4QFY2011, primarily due to higher volumes. Commissioning
of Unit 3 and 4 in Surat is expected to aid the company’s volume
growth. OPM is expected to expand by 262bp yoy to 27.0%,
while the bottom line is likely to decline by 41.8% yoy to `21cr
for 4QFY2011 due to higher depreciation and interest costs.
Outlook
We expect capacity addition to gather pace by the end of the
Eleventh Plan in FY2012. However, the country's power-deficit
scenario is likely to persist, as supply is not expected to keep
pace with demand due to delay in capacity addition by
companies and shortage of fuel. Thus, players with high
merchant capacities would benefit due to healthy merchant
tariffs, which are expected to prevail over the next two years.
However, companies under our coverage mostly operate under
the regulated return model and, hence, are not expected to
benefit from this.
We recommend an Accumulate rating on NTPC and maintain
our Buy view on CESC and GIPCL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 4QFY2011, we expect power-generating companies in our
universe to report top-line growth of 11.6% yoy, driven by
capacity additions and higher tariffs. However, operating profit
is expected to increase at a higher rate of 25.6% yoy. Net profit
is expected to rise by 10.2% yoy.
Capacity addition: Status check
Generation
As of February 2011, 32,762MW of power capacity was
commissioned, that is a mere 54% of the original Eleventh Plan
target. However, we expect the capacity addition to pick-up in
FY2012, being the last year of the plan period. It may be noted
here that inordinate delays in project completion has led to the
CEA revising the Eleventh Plan capacity estimates to 62,488MW,
much below the target of 78,577MW set at the beginning of
the period. Capacity addition has generally been delayed due
to execution issues relating to acquisition of land and obtaining
environment and other statutory clearances. In all, we expect
49,000MW to be added during the plan period.
Transmission lines
During 11MFY2011, 6,697 circuit kilometers (ckm) were added
to the 400kv transmission lines, as against the targeted
12,139ckm for the mentioned period. Total addition to 220kv
transmission lines stood at 5,854ckm, as against the targeted
5,232ckm.
Transmission sub-stations
During 11MFY2011, total addition to the 400kv substation
category stood at 10,635 MW, as against targeted 14,385MW
for the mentioned period. Addition to the 220kv sub-station
category stood at 10,266MW, as against the targeted 9,866MW.
Power-deficit situation
The country continues to face power deficit due to the delay in
commissioning of new capacities, fuel shortage and deficiencies
in the T&D system. India's overall and peak power-deficit levels
during 11MFY2011 stood at 8.6% and 10.3%, respectively,
lower than 9.9% and 12.6% reported in 11MFY2010.
Operational highlights
During 11MFY2011, power generation in India rose by 5.0%
yoy to 729.7BU (695.1BU). Overall, the country's thermal power
generation rose by 3.7% yoy to 601.5BU. The plant load factor
(PLF) of the thermal plants for 11MFY2010 stood at 74.3%,
higher by 238bp than the targeted 72.0%. Hydro power
generation increased by 6.6% yoy to 104.9BU, while nuclear
power generated grew substantially by 39.8% yoy to 23.3BU
during the mentioned period.
Power deficit highest in the Western region
The Western region continues to record the highest power deficit
in the country. During 11MFY2011, the region's power deficit
stood at 13.4%. Maharashtra had overall power deficit of 16.6%
and peak deficit of 21.7%. The Eastern region had the lowest
power deficit of 4.3%, while the peak deficit was 5%.
Coal scenario
Coal
India's coal-based power generation capacity, which currently
stands at 92,418MW, accounts for ~54% of the overall capacity.
The dominance of coal as the fuel for power generation in India
is expected to continue with a major portion of the upcoming
capacity being based on coal. The power sector is the leading
consumer of coal in India, accounting for ~70% of the country's
overall demand in FY2010. As per our estimates, coal demand
by India's power sector would grow by ~280mn tonnes over
the next five years.
Coal-based power plants have been facing fuel shortage on
account of various reasons such as delays in procuring coal
linkages, issues in obtaining environment clearances and other
regulatory approvals for developing coal blocks, hurdles in the
expansion of coal blocks, and logistical and infrastructural
issues. As of February 2011, 32 critical thermal power stations
out of the 82 monitored by the CEA had critical coal stocks for
less than seven days.
Key corporate developments
NTPC
Anushakti Vidhyut Nigam, a JV between NTPC and Nuclear
Power Corporation of India (NPCIL), was incorporated during
the quarter for developing nuclear power projects. While
NPCIL will hold 51% stake, NTPC will hold the balance 49%
of the equity share capital of the company.
Unit-I of the 500MW Indira Gandhi Super Thermal Power
Project at Jhajjar, a JV of NTPC, Haryana Power Generation
Corp., Government of Haryana and Indraprastha Power
Generation Co., was declared commercial in 4QFY2011.
During 4QFY2011, NTPC completed the synchronisation
of Unit-I of the Sipat Super Thermal Power Station
and Unit-VI of the 500MW Farakka Super Thermal Power
Station in West Bengal.
Performance on the bourses
Most power stocks under our coverage underperformed the
Sensex, which lost 5.2% during the quarter. CESC and GIPCL
also fell by 15% and 11.3%, respectively. However, NTPC fell
by only 3.8%.
4QFY2011 expectations
We expect NTPC to record an 8.7% yoy increase in its top line
to `13,835cr for the quarter, aided by volume growth due to
the commencement of new capacities and higher tariffs,
in line with the fuel price hike. The company’s operating profit
is expected to increase by 24.3% yoy to `3,785cr. Net profit for
the quarter is estimated to grow by 9.8% yoy to `2,216cr.
CESC is expected to register 27.3% yoy growth in its standalone
top line to `980cr, aided by higher volumes due to
commissioning of the 250MW Budge-Budge plant. OPM is
expected to expand by 260bp yoy to 28.6%, while net profit is
likely to increase by 37% yoy to `137cr for 4QFY2011.
We expect GIPCL to register a 26.7% yoy increase in revenue in
4QFY2011, primarily due to higher volumes. Commissioning
of Unit 3 and 4 in Surat is expected to aid the company’s volume
growth. OPM is expected to expand by 262bp yoy to 27.0%,
while the bottom line is likely to decline by 41.8% yoy to `21cr
for 4QFY2011 due to higher depreciation and interest costs.
Outlook
We expect capacity addition to gather pace by the end of the
Eleventh Plan in FY2012. However, the country's power-deficit
scenario is likely to persist, as supply is not expected to keep
pace with demand due to delay in capacity addition by
companies and shortage of fuel. Thus, players with high
merchant capacities would benefit due to healthy merchant
tariffs, which are expected to prevail over the next two years.
However, companies under our coverage mostly operate under
the regulated return model and, hence, are not expected to
benefit from this.
We recommend an Accumulate rating on NTPC and maintain
our Buy view on CESC and GIPCL.
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