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India Equity Research Reports, IPO and Stock News
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A s a f e b e t …
We met A K Singhal (Executive Director: Finance) of NTPC to get an
insight into the company’s growth and future plans. Currently, the
company is less affected by headwinds that the sector is facing in terms
of back-downs by SEBs, fuel linkage issues (NTPC has committed
supplies from Coal India for its existing and incremental capacities- 90-
95% of ACQ) and exposure to merchant market. The key variable to
monitor in NTPC is capacity addition and commercialisation of capacities.
Unlike other private sector IPPs, the risk of losing money in upcoming
projects is minimal. Till date, the company has added 660 MW (Sipat
super critical) and commercialised the 500 MW Simhadri power plant.
ƒ Company targets 4980 MW in FY12
The company expects capacity of 4980 MW. Though the guidance
has been upped from its initial FY12 guidance of 4320 MW of
capacity addition, we remain conservative on the same. We would
wait for further clarity. Till date, the company has added 660 MW
(Sipat super critical) and commercialised the 500 MW Simhadri
power plant. In Q3FY12, the company would commercialise 1160
MW. In FY13, the company expect 5000 MW of capacity addition.
ƒ Back-down by SEBs to prevail in Q2FY12
Like in Q1FY12, PLFs of gas based of NTPC (till August 2011) are
around ~ 63-65%. The company continues to face back-down by
SEBs in gas based capacity. The company would be grossing up
RoEs at the pre–tax rate of 23% (against 18% in MAT) in FY12.
Capex for FY12 stands at | 18,000 crore (amount spent YTD: | 4600
crore) while for FY13 it is | 22,000 crore.
V a l u a t i o n
At the CMP of | 167, the stock is trading at a P/E of 15.1x and 12.8x for
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 2.0x and 1.8x FY13E, respectively. Superior execution (in
terms of commercialisation of power capacities) could re-rate the stock.
We maintain our target price of | 202. Slippage in capacity ramp up in
FY12 and back-down by SEBs are the key risks to our call
Other key highlights of management meet
• The single most important concern for the sector is deterioration
in financial health of SEBs
• The company has not faced any problem in realising payment but
debtor days cycle w.r.t some SEBs has gone up
• With respect to back-down by SEBs, the management maintains it
is more visible in case of regasified-liquefied natural gas (R-LNG)
(current price ~$15 mmbtu)
• The management has a vision of entering the distribution space in
the next couple of years (although no specific timelines were
given)
• There will not be any bulk tendering for the new 5320 MW
projects just announced
• Four coal blocks de allocated from NTPC have been reallocated to
them are on target for coal production of ~ 15-17 MT by FY17
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A s a f e b e t …
We met A K Singhal (Executive Director: Finance) of NTPC to get an
insight into the company’s growth and future plans. Currently, the
company is less affected by headwinds that the sector is facing in terms
of back-downs by SEBs, fuel linkage issues (NTPC has committed
supplies from Coal India for its existing and incremental capacities- 90-
95% of ACQ) and exposure to merchant market. The key variable to
monitor in NTPC is capacity addition and commercialisation of capacities.
Unlike other private sector IPPs, the risk of losing money in upcoming
projects is minimal. Till date, the company has added 660 MW (Sipat
super critical) and commercialised the 500 MW Simhadri power plant.
ƒ Company targets 4980 MW in FY12
The company expects capacity of 4980 MW. Though the guidance
has been upped from its initial FY12 guidance of 4320 MW of
capacity addition, we remain conservative on the same. We would
wait for further clarity. Till date, the company has added 660 MW
(Sipat super critical) and commercialised the 500 MW Simhadri
power plant. In Q3FY12, the company would commercialise 1160
MW. In FY13, the company expect 5000 MW of capacity addition.
ƒ Back-down by SEBs to prevail in Q2FY12
Like in Q1FY12, PLFs of gas based of NTPC (till August 2011) are
around ~ 63-65%. The company continues to face back-down by
SEBs in gas based capacity. The company would be grossing up
RoEs at the pre–tax rate of 23% (against 18% in MAT) in FY12.
Capex for FY12 stands at | 18,000 crore (amount spent YTD: | 4600
crore) while for FY13 it is | 22,000 crore.
V a l u a t i o n
At the CMP of | 167, the stock is trading at a P/E of 15.1x and 12.8x for
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 2.0x and 1.8x FY13E, respectively. Superior execution (in
terms of commercialisation of power capacities) could re-rate the stock.
We maintain our target price of | 202. Slippage in capacity ramp up in
FY12 and back-down by SEBs are the key risks to our call
Other key highlights of management meet
• The single most important concern for the sector is deterioration
in financial health of SEBs
• The company has not faced any problem in realising payment but
debtor days cycle w.r.t some SEBs has gone up
• With respect to back-down by SEBs, the management maintains it
is more visible in case of regasified-liquefied natural gas (R-LNG)
(current price ~$15 mmbtu)
• The management has a vision of entering the distribution space in
the next couple of years (although no specific timelines were
given)
• There will not be any bulk tendering for the new 5320 MW
projects just announced
• Four coal blocks de allocated from NTPC have been reallocated to
them are on target for coal production of ~ 15-17 MT by FY17
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