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EARNINGS REVIEW
NTPC (NTPC.BO)
Neutral Equity Research
Above expectations due to one-offs and other income; Neutral
What surprised us
NTPC reported 2QFY12 PAT of Rs24bn vs GSe of Rs20.2bn and Bloomberg
consensus of Rs20.5bn. However, the reported PAT has one-off items primarily
consisting of 1) Rs7.6bn in prior-period income (Rs4.9bn, net of taxes); 2)
reversal of interest payable of Rs2.0bn as per the court order in the quarter.
Other income is higher yoy by Rs2.5bn. Adjusted PAT of Rs16.6bn is down 20%
qoq but up 17% yoy. Availability factor declined by 300bp and PLF’s for coalbased plants declined by 4.5%. NTPC confirmed that 1) ROE will remain grossed
up with normal tax rate for FY12E; 2) no payment issues/defaults from the SEBs,
though average receivable days have gone up by 30 days.
NTPC commissioned about 1160MW of capacity so far in FY12 – 500MW of
Simhadri Unit 3 in September and 660MW of Sipat 1 in October, the benefits of
which will likely be reflected in 3QFY12 results. Though NTPC has targeted to
add 4.3GW (including JVs) of capacity during FY12, we estimate that only about
2.5GW of capacity will likely come on-stream during FY12E due to execution
issues at the respective plants.
What to do with the stock
Maintain Neutral rating on NTPC with a 12-m DCF-based TP of Rs190, implying
potential upside of about 9%. Though we believe NTPC is best-positioned to
withstand the deteriorating operating environment on account of its regulated
business model, we see downside risks to its earnings due to a shortage in
domestic fuel supplies and delays on commissioning of its new projects. NTPC
is currently trading in line with its historical averages on FY12E P/E and P/B.
Risks: Continued fuel shortages and commissioning of projects ahead of
estimate timelines
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
NTPC (NTPC.BO)
Neutral Equity Research
Above expectations due to one-offs and other income; Neutral
What surprised us
NTPC reported 2QFY12 PAT of Rs24bn vs GSe of Rs20.2bn and Bloomberg
consensus of Rs20.5bn. However, the reported PAT has one-off items primarily
consisting of 1) Rs7.6bn in prior-period income (Rs4.9bn, net of taxes); 2)
reversal of interest payable of Rs2.0bn as per the court order in the quarter.
Other income is higher yoy by Rs2.5bn. Adjusted PAT of Rs16.6bn is down 20%
qoq but up 17% yoy. Availability factor declined by 300bp and PLF’s for coalbased plants declined by 4.5%. NTPC confirmed that 1) ROE will remain grossed
up with normal tax rate for FY12E; 2) no payment issues/defaults from the SEBs,
though average receivable days have gone up by 30 days.
NTPC commissioned about 1160MW of capacity so far in FY12 – 500MW of
Simhadri Unit 3 in September and 660MW of Sipat 1 in October, the benefits of
which will likely be reflected in 3QFY12 results. Though NTPC has targeted to
add 4.3GW (including JVs) of capacity during FY12, we estimate that only about
2.5GW of capacity will likely come on-stream during FY12E due to execution
issues at the respective plants.
What to do with the stock
Maintain Neutral rating on NTPC with a 12-m DCF-based TP of Rs190, implying
potential upside of about 9%. Though we believe NTPC is best-positioned to
withstand the deteriorating operating environment on account of its regulated
business model, we see downside risks to its earnings due to a shortage in
domestic fuel supplies and delays on commissioning of its new projects. NTPC
is currently trading in line with its historical averages on FY12E P/E and P/B.
Risks: Continued fuel shortages and commissioning of projects ahead of
estimate timelines
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