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NTPC's 4Q11 profits were ahead of its provisional numbers. We remain confident on its
capacity additions but the recent development on coal blocks is an overhang, in our view.
PPAs totalling 100GW ensure longer term RoE defensiveness. We continue to view the
stock as a defensive play. Buy
4Q11 results ahead of provisional numbers even after adjustments
NTPC’s adjusted 4Q11 profits of Rs28bn were 10% ahead of its provisional numbers
(Rs25.1bn). After adjusting for the impact of prior-period items, previous year sales,
depreciation and deferred tax for 4Q10, this implies growth of 21% yoy. 4Q11 sales were in
line with provisional numbers at Rs159.8bn. For FY11, the company reported sales of
Rs565bn (+17% yoy) and adjusted PAT of Rs89bn, +5% yoy.
We are confident on the company’s project pipeline; defensive RoE to continue
NTPC currently has about 15,000MW of capacity at various stages of execution. A significant
portion of the company’s planned expansion is through brownfield projects, which will lower
execution risk, in our view. We expect about 2,100MW of standalone capacity to come online
during FY12 and another 5,100MW to become operational in FY12 as per CEA estimate. For
the long term, the company has also signed power purchase agreements totalling 100GW
(on a regulated basis), ensuring continuation of defensive RoE.
Likely loss of coal blocks is an overhang, in our view
The Coal Ministry has proposed to take back five coal blocks with reserves worth 3.1bn tonnes
from NTPC for not starting work on them despite having got allocation in FY06. NTPC is
presenting a case to the ministry indicating why the blocks should remain with it. However, the
issue is an overhang on the stock, in our view, until it gets sorted out.
We cut our estimates and target price – a defensive play; Buy maintained
Following FY11 results, we reduce our earnings estimates by 7% over FY12-13 and also increase
the cost of capital, which reduces our DCF-based target price to Rs203 (from Rs233). We like
NTPC in the Indian utility space, as we see it as a low-risk stock compared with its private-sector
peers. The stock currently trades at 2x FY12F book value on core RoE of 19%. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NTPC's 4Q11 profits were ahead of its provisional numbers. We remain confident on its
capacity additions but the recent development on coal blocks is an overhang, in our view.
PPAs totalling 100GW ensure longer term RoE defensiveness. We continue to view the
stock as a defensive play. Buy
4Q11 results ahead of provisional numbers even after adjustments
NTPC’s adjusted 4Q11 profits of Rs28bn were 10% ahead of its provisional numbers
(Rs25.1bn). After adjusting for the impact of prior-period items, previous year sales,
depreciation and deferred tax for 4Q10, this implies growth of 21% yoy. 4Q11 sales were in
line with provisional numbers at Rs159.8bn. For FY11, the company reported sales of
Rs565bn (+17% yoy) and adjusted PAT of Rs89bn, +5% yoy.
We are confident on the company’s project pipeline; defensive RoE to continue
NTPC currently has about 15,000MW of capacity at various stages of execution. A significant
portion of the company’s planned expansion is through brownfield projects, which will lower
execution risk, in our view. We expect about 2,100MW of standalone capacity to come online
during FY12 and another 5,100MW to become operational in FY12 as per CEA estimate. For
the long term, the company has also signed power purchase agreements totalling 100GW
(on a regulated basis), ensuring continuation of defensive RoE.
Likely loss of coal blocks is an overhang, in our view
The Coal Ministry has proposed to take back five coal blocks with reserves worth 3.1bn tonnes
from NTPC for not starting work on them despite having got allocation in FY06. NTPC is
presenting a case to the ministry indicating why the blocks should remain with it. However, the
issue is an overhang on the stock, in our view, until it gets sorted out.
We cut our estimates and target price – a defensive play; Buy maintained
Following FY11 results, we reduce our earnings estimates by 7% over FY12-13 and also increase
the cost of capital, which reduces our DCF-based target price to Rs203 (from Rs233). We like
NTPC in the Indian utility space, as we see it as a low-risk stock compared with its private-sector
peers. The stock currently trades at 2x FY12F book value on core RoE of 19%. Maintain Buy.
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