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Prima facie, 3QFY12 normalized earnings disappoint…
At Rs20.1bn, NTPC’s 3QFY12 normalized net profit appears 12% below our forecast
(13% below consensus); at Rs30.5bn, normalized EBITDA missed our forecast by 14%.
We peg NTPC’s first-cut 3QFY12 normalized net profit by adjusting the reported PAT
(Rs21.3bn, 7% below our forecast) for [1] prior period sales write-back of Rs1.6bn, [2] a
one-off provision of Rs0.4bn relating to an exploratory oil/gas block, and [3] prior-period
tax write-back of Rs3.1bn. Notably, NTPC has recommended an interim dividend of
Rs3.5/share (implying a 2% dividend yield on 27 January closing price).
…treatment of the exaggerated tax ‘refund’ to customers holds key
to interpretation of the result
Notes to accounts presented in NTPC’s 3QFY12 earnings release indicates that sales
included a ‘negative’ Rs4.07bn tax recoverable from customers (effectively a refund via
adjustment in the tariffs) as per CERC’s 2004-09 tariff regulations. Although such an
adjustment typically recurs in NTPC’s quarterly results and we deem the same to be
‘normal’ as tariff orders for NTPC’s stations by the Regulatory bodies (CERC, APTEL)
are issued through the year, arguably, the magnitude of this line item in 3QFY12 has had
an exaggerated impact on the top line (and in turn, the EBITDA and the bottom line). If
we were to adjust the reported financials for this line item as well, NTPC’s 3QFY12
normalized net profit would appear at Rs24.1bn, ~5% ahead of our forecast.
What if our first-cut analysis holds good?
Going by our base-case assessment of NTPC’s 3QFY12 normalized financials, we note:
[1] realization appears to have dropped ~4.8% QoQ to below Rs3/kWh, partially on the
back of a 3.7% QoQ drop in unit fuel cost and [2] pick-up in efficiency linked incentives
appears subdued, particularly considering the ~1100MW of effective capacity accretion.
Accordingly, our earnings estimates for NTPC would entail a downside risk.
As usual, adjustments enunciated in earnings call remain critical
Ahead of its earnings call (scheduled at 1600hrs IST on January 30), we maintain our
earnings forecast for NTPC. We particularly await clarity on [1] key operating metrics, [2]
dent from Rs4.07bn tariff-orders related tax incidence on reported revenues, and [3]
capacity addition and captive mining related timelines. On our estimates, the stock
trades at 1.8x FY13F P/B. Maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Prima facie, 3QFY12 normalized earnings disappoint…
At Rs20.1bn, NTPC’s 3QFY12 normalized net profit appears 12% below our forecast
(13% below consensus); at Rs30.5bn, normalized EBITDA missed our forecast by 14%.
We peg NTPC’s first-cut 3QFY12 normalized net profit by adjusting the reported PAT
(Rs21.3bn, 7% below our forecast) for [1] prior period sales write-back of Rs1.6bn, [2] a
one-off provision of Rs0.4bn relating to an exploratory oil/gas block, and [3] prior-period
tax write-back of Rs3.1bn. Notably, NTPC has recommended an interim dividend of
Rs3.5/share (implying a 2% dividend yield on 27 January closing price).
…treatment of the exaggerated tax ‘refund’ to customers holds key
to interpretation of the result
Notes to accounts presented in NTPC’s 3QFY12 earnings release indicates that sales
included a ‘negative’ Rs4.07bn tax recoverable from customers (effectively a refund via
adjustment in the tariffs) as per CERC’s 2004-09 tariff regulations. Although such an
adjustment typically recurs in NTPC’s quarterly results and we deem the same to be
‘normal’ as tariff orders for NTPC’s stations by the Regulatory bodies (CERC, APTEL)
are issued through the year, arguably, the magnitude of this line item in 3QFY12 has had
an exaggerated impact on the top line (and in turn, the EBITDA and the bottom line). If
we were to adjust the reported financials for this line item as well, NTPC’s 3QFY12
normalized net profit would appear at Rs24.1bn, ~5% ahead of our forecast.
What if our first-cut analysis holds good?
Going by our base-case assessment of NTPC’s 3QFY12 normalized financials, we note:
[1] realization appears to have dropped ~4.8% QoQ to below Rs3/kWh, partially on the
back of a 3.7% QoQ drop in unit fuel cost and [2] pick-up in efficiency linked incentives
appears subdued, particularly considering the ~1100MW of effective capacity accretion.
Accordingly, our earnings estimates for NTPC would entail a downside risk.
As usual, adjustments enunciated in earnings call remain critical
Ahead of its earnings call (scheduled at 1600hrs IST on January 30), we maintain our
earnings forecast for NTPC. We particularly await clarity on [1] key operating metrics, [2]
dent from Rs4.07bn tariff-orders related tax incidence on reported revenues, and [3]
capacity addition and captive mining related timelines. On our estimates, the stock
trades at 1.8x FY13F P/B. Maintain BUY.
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