CMP: Rs. 153.20; Buy at every dips.
Short term Target: Rs. 175; Medium to Long Term target Rs. 214.00; STOP LOSS – Rs. 131.00; Market
Cap: Rs. 1,26,320.51 Cr; 52 Week High/Low: Rs. 190.75 / Rs. 137.00
Total Shares: 824,54,64,400
shares; Promoters: 696,73,61,180 shares – 84.50 %; Total Public holding:
127,81,03,220 shares – 15.50 %; Book Value: Rs. 88.89; Face Value: Rs. 10.00;
EPS: Rs. 12.57; Div: 40 %; P/E: 12.18 times; Ind. P/E: 14.41; EV/EBITDA: 10.78
Total Debt: Rs. 47,338.33 Cr; Enterprise Value: Rs. 1,73,658.84 Cr.
NTPC INDIA LTD: The Company was founded in 1975
and is based in New Delhi, India. NTPC Limited engages in the generation,
distribution, and sale of bulk power to state power utilities in India. It
generates power from coal, gas, hydro, and liquid fuel sources. The company
also undertakes consultancy and turnkey project contracts that comprise engineering,
project management, construction management, and operation and maintenance of
power plants. In addition, it engages in the oil and gas exploration, and coal
mining activities. The Company’s other business includes providing consultancy,
project management and supervision, oil and gas exploration, and coal mining.
As of march 31, 2012, the Company was engaged in executing two projects: Lata
Tapovan hydro electric project (171 mega-watts (MW)), located in Chamoli
District of Uttarakhand and Rammam Hydro Electric Project, Stage III (120 MW)
located in Darjeeling District of West Bengal and West Sikkim District of
Sikkim. As of March 31, 2012, the Company had installed capacity in India was
199877.03 mega-watts. During the fiscal year ended March 31, 2012, the Company
added 2,820 mega-watts of installed capacity. As of March 31, 2012, the Company
had five subsidiaries: NTPC Electric Supply Company Limited, NTPC Vidyut Vyapar
Nigam Limited, NTPC Hydro Limited, Kanti Bijlee Utpadan Nigam Limited and
Bhartiya Rail Bijlee Company Limited.
Investment Rationale:
NTPC plans to spend Rs. 20,995 crore
towards capex whereas the same as of H1FY13 stands at Rs. 8,081 crore. NTPC’s Q2FY13
capex is pegged at Rs. 4,103 crore. As of H1FY13, the total installed capacity of
NTPC group was 39,174 MW out of which 4,364 MW capacities is attributed to
J.V.’s & subsidiary companies. The commercial capacity of NTPC group stood
at 37,236 MW. As of H1FY13, NTPC has commissioned 2,160 MW of capacity whereas
2,820 MW of capacity has been commercialised. During H1FY13, NTPC commissioned
2,160 MW which comprises of one unit of 660 MW at Sipat and one unit of 500 MW
each at Rihand, Mauda and Vindhyachal. During this period 2,820 megawatt has
been declared on commercial operation, two units of 660 megawatt at Sipat and
one unit of 500 megawatt each at Farakka, Simhadri and Jhajjar. The Gross generation of NTPC for Q2FY13 stood
at 52.72 BU’s as against 50.88 BU’s, implying a rise of 3.62 % YoY. But on a
sequential basis, generation was down by 10 % due to planned shutdown across
majority of the operational capacity. The regulated asset base of the NTPC
stands at Rs. 30,075 crore as of Q2FY13 as against an asset base of Rs. 29,295
crore in Q1FY13. The imported coal blending was at 4 % in Q2FY13
whereas for H1FY13 the same stood at 6.2 % (10.6% in H1FY12). NTPC received 32
MT of coal in Q2FY13 vs. 25.1 in Q2FY12 (increase of 24% YoY). The
materialisation rate in Q2FY13 stood at 103 % vs. 88 % in Q2FY12. On the
imported coal front, NTPC imported 1.5 MT, a decline of 45 % YoY. PLF for coal
based stations for Q2FY13 stood at 74.9% (vs. 78.4% in Q2FY12) whereas PLF for
gas based power for Q2FY13 was 57.7% (vs. 60.8% in Q2FY12). NTPC’s Total capex committed towards development
of captive mines till Q2FY13 stood at Rs. 959 crore. The company expects commissioning
of Pakhri Barwadih in CY13 and expects the peak production to be at 15 MT’s by
FY17. The Average cost of borrowing stood at 7.31 %.
The Debt/Equity ratio stood at 0.68 x as of Q2FY13. The generation loss on account of fuel
supply was 5.05 BU’s in Q2FY13 as compared to 1.95 BU’s in Q2FY12. While NTPC has
received the in principle approval for re-allocation of the coal blocks, the
final communication in this regard is awaited. The management is confident of
receiving the same and has continued with its development work and capital
expenditure in these blocks. The management has indicated that the production
from its Pakhri - Barwadih coal block is likely to start in 2013. The
management has indicated that the company continues to realise its dues
(including servicing of bonds under the one-time settlement scheme) from the
state utilities. Debtor days remained stable at 35 days in Q2FY13 as against 32
days in Q1FY13.
Outlook and Valuation:
As usual NTPC reported better Q2FY13 revenues
of Rs. 16,351 crore and PAT of Rs. 3,142 crore which are higher than estimates
owing to many one offs relating to accounting. Adjusted PAT came in at Rs. 2,047
crore. Other income was higher than estimates on account interest income on
deposits and higher dividends from J.V.s & Subsidiaries. Capacity additions
during Q2FY13 was nil due to planned shutdown. The Gross electricity generation
growth was at 3.6 % YoY. There was a 10 % QoQ decline of 52.72 billion units (BU’s)
mainly due to planned shutdown of capacity. As a result there was contraction
of 350 bps and 310 bps QoQ in Coal plant and gas plant PLF’s, respectively in
Q2FY13. However, as per management, PLF’s have started showing up tick from
October 2012. NTPC has commercialised capacity to the tune of 2,820 MW in
H1FY13. Realisation per unit for Q2FY13 stood at Rs. 3.05/Kwhr. NTPC’s capacity
addition in 12th Plan is front loaded. The company expects to commission as
much as 50 % of 12th plan target over FY13- FY14E. It is believed that the NTPC
is on track to achieve the same as it has commissioned 15 % of the target in
H1FY13. If the capacity additions plans pan out accordingly, then the rate of
capitalisation would surprise everyone on the upside. However, NTPC is expected
to commission 3,670 MW in FY13E (88% of the planned target in FY13E). The contribution
of CWIP as % of Networth is expected to gradually decline to 49 % and 46% in
FY13E and FY14E respectively, implying higher capitalisation intensity in the
balance sheet. Given the rate of capacity additions in H1FY13, it is believed
that NTPC will be able increase the rate of gross block addition from existing
CWIP. Adding to this NTPC is one of safest utility to take shelter under
(Regulated Model/Lesser fuel risk/Underleveraged balance sheet) when power
sector is facing challenging times. At the value of 1.8x to its FY14E book
value, markets will wait to see the run rate of capacity addition before
re-rating the NTPC. Capacity addition in the Twelfth Five Year Plan is lower at
51,000 MW as against the earlier company estimates of 75000 MW, the focus on
commercialization (thereby turning CWIP to gross fix assets) can lead to
re-rating , going forward. The key Risks could be-delay in capacity addition in
H1FY13-FY14 and Overhang due to disinvestment by Government of India to the
tune of 9.5 %. At the CMP of Rs. 153.20, the stock is trading a P/E of 10.17 x FY13E and 8.67 x
FY14E respectively. Earnings per share (EPS) of company for FY13E and FY14E are
seen at Rs. 15.06 and Rs. 17.67 respectively, in my view the Fair Value of NTPC
comes at Rs. 214. One can buy NTPC with a target price of Rs. 214.00 for Medium
to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 175.00
| KEY FINANCIALS | FY11 | FY12E | FY13E | FY14E |
|---|
| SALES (Rs. Crs) | 57,407.00 | 64,830.00 | 67,459.00 | 73,207.00 |
| NET PROFIT (Rs. Crs) | 9,103.00 | 9,223.00 | 10,166.00 | 11,474.00 |
| EPS (Rs.) | 11.00 | 11.20 | 12.30 | 13.90 |
| PE (x) | 15.00 | 15.10 | 13.70 | 12.20 |
| P/BV (x) | 2.10 | 1.90 | 1.70 | 1.60 |
| EV/EBITDA (x) | 11.40 | 10.20 | 11.60 | 11.40 |
| ROE (%) | 13.40 | 12.60 | 12.80 | 13.10 |
| ROCE (%) | 11.00 | 11.50 | 11.00 | 10.80 |
I would buy NTPC with a price target of Rs. 214.00 for the 6 month target and for short term it would be Rs. 175.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 141.00 on your every purchase.
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