SlideShare a Scribd company logo

Ntpc 2 qfy11 result update - 271010

Angel Broking, profile picture
Angel Broking

This document summarizes NTPC's financial results for the second quarter of FY2011. Key highlights include: - Net sales grew 20.5% year-over-year to Rs. 13,350 crore, driven by higher power generation and realizations. - Operating profit declined 8.5% to Rs. 3,371 crore due to higher fuel costs and other expenses. - Reported net profit fell 2% to Rs. 2,107 crore due to higher provisions, but benefited from extraordinary income related to prior periods. - The analyst maintains an "Accumulate" rating with a target price of Rs. 230, seeing continued growth from capacity additions but some pressure on margins.

Economy & Finance
1 of 12
Download to read offline
1
2
3
4
5
6
7
8
9
10
11
12
Please refer to important disclosures at the end of this report 1 Y/E March (` cr) 2QFY2011 1QFY2011 % chg qoq 2QFY2010 % chg yoy Net sales 13,350 13,303 0.3 11,253 20.5 Operating profit 3,371 3,345 0.8 3,684 (8.5) OPM (%) 25.3 25.1 11bp 32.7 (748bp) Rep. net profit 2,107 1,842 14.4 2,151 (2.0) Source: Company, Angel Research During 2QFY2011, NTPC’s adjusted net profit declined by 17.8% yoy to `1,845cr, which was in line with our estimates. During the quarter, bottom-line performance was affected by under recovery of fixed costs in new plants, lower other income due to lower interest rates and reduction in tax saving bonds. We maintain Accumulate on the stock with a Target Price of `230. Top-line growth at 20.5% yoy: NTPC posted robust top-line growth of 20.5% yoy to `13,350cr in 2QFY2011, primarily driven by higher realisations as Energy Sent Out (ESO) grew by modest 3.5%, despite the 1,480MW capacity addition since 2QFY2010. Power generation during the quarter was affected by fuel supply issues, maintenance-related shutdown and backdown of plants due to monsoons. OPM fell by 748bp yoy to 25.3% due to higher fuel costs and other expenses. NTPC’s reported net profit was down by 2% yoy to `2,107cr. During the quarter, the company benefitted from extraordinary income of `1,763cr due to the write-back of depreciation and advance against depreciation (AAD) recognised as prior-period sale, which boosted its bottom line. However, the company also made a provision of `1,263cr with respect to sundry debtors, which impacted its bottom line. Valuation: At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and 2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its regulated business model, with an assured return on equity (RoE) and strong cash flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E estimates to arrive at a Target Price of `230. We maintain Accumulate on the stock. Key Financials (Consolidated) Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E Net sales 44,245 50,188 52,584 59,927 % chg 14.5 13.4 4.8 14.0 Net profit 8,092 8,837 8,449 9,427 % chg 8.3 9.2 (4.4) 11.6 OPM (%) 23.8 29.9 29.3 29.4 EPS (`) 9.8 10.7 10.2 11.4 P/E (x) 20.3 18.5 19.4 17.4 P/BV (x) 2.7 2.6 2.4 2.2 RoE (%) 14.2 14.2 12.6 13.0 RoCE (%) 8.8 11.7 10.9 11.3 EV/Sales (x) 4.2 3.8 3.7 3.4 EV/EBITDA (x) 17.6 12.8 12.7 11.7 Source: Company, Angel Research ACCUMULATE CMP `199 Target Price `230 Investment Period 12 Months Stock Info Sector Bloomberg Code Shareholding Pattern (%) Promoters 84.5 MF / Banks / Indian Fls 10.4 FII / NRIs / OCBs 2.9 Indian Public / Others 2.2 Abs. (%) 3m 1yr 3yr Sensex 10.7 22.3 4.0 NTPC (1.3) (8.6) (13.1) 10 20,005 6,013 NTPC.BO NATP@IN Face Value (Rs) BSE Sensex Nifty Reuters Code 163,879 0.6 242/190 504866 Power Avg. Daily Volume Market Cap (Rs cr) Beta 52 Week High / Low Rupesh Sankhe 022-40403800 Ext: 319 rupeshd.sankhe@angelbroking.com V Srinivasan 022-40403800 Ext: 330 v.srinivasan@angelbroking.com NTPC Performance Highlights 2QFY2011 Result Update | Power October 27, 2010
NTPC |2QFY2011 Result Update October 27, 2010 2 Exhibit 1: 2QFY2011 performance – Standalone Y/E March (` cr) 2QFY2011 1QFY2011 %Chg qoq 2QFY2010 % Chg yoy 1HFY2011 1HFY2010 % Chg Net Sales 12,989 12,944 0.3 10,783 20.5 25,934 22,785 13.8 Other Operating Income 361 358 0.9 470 (23.1) 719 995 (27.7) Total Operating Income 13,350 13,303 0.4 11,253 18.6 26,653 23,781 12.1 Fuel Cost 8,607 8,702 (1.1) 6,607 30.3 17,310 14,350 20.6 (% of Sales) 66 67 61 67 63 Staff Costs 709 684 3.7 504 40.7 1,393 1,094 27.3 (% of Sales) 5 5 5 5 5 Other Expenses 662.8 572 15.9 458 44.6 1,234 950 29.9 (% of Sales) 5 4 4 5 4 Total Expenditure 9,979 9,958 0.2 7,569 31.8 19,937 16,394 21.6 Operating Profit 3,371 3,345 0.8 3,684 (8.5) 6,716 7,386 (9.1) OPM 25.3 25.1 32.7 25.9 32.4 Interest 590 536 10.2 541 9.2 1,126 985 14.3 Depreciation 506 683 (25.8) 644 (21.4) 1,189 1,257 (5.4) Other Income 254 227 11.8 270 (6.1) 480 521 (7.8) PBT (excl. Extr. Items) 2,528 2,353 7.4 2,769 (8.7) 4,882 5,665 (13.8) Extr. Income/(Expense) 501 - - 501 (1) PBT (incl. Extr. Items) 3,029 2,353 28.7 2,769 9.4 5,383 5,664 (5.0) (% of Sales) 23 18 26 21 25 Provision for Taxation 922 511 80.2 618 49.0 1,433 1,319 8.6 (% of PBT) 30 22 22 27 23 Reported PAT 2,107 1,842 14.4 2,151 (2.0) 3,950 4,344 (9.1) PATM 16 14 20 15 19 Equity Capital 8,245 8,245 8,246 8,245 8,245 EPS (`) 2.6 2.2 2.6 4.8 5.3 Source: Company, Angel Research Exhibit 2: 2QFY2011- Actual v/s Angel estimates (` cr) Actual Estimates Variation (%) Net sales 13,350 13,395 (0.3) Operating profit 3,371 3,211 5.0 Net profit 2,107 1,845 14.2 Source: Company, Angel Research Exhibit 3: Details of one-off items Reported PAT (` cr) 2,107 Prior-period sales ( 181) Prior-period adjustments (1,769) Prior-period depreciation 106 Prior-period provision 1,262 Tax 162 Reduction in fixed charges 252 Others ( 94) Adjusted PAT 1,847 Source: Company, Angel Research
NTPC |2QFY2011 Result Update October 27, 2010 3 Operational highlights During the quarter, NTPC’s generation volumes grew by 3.7% yoy to 52.2BU (50.4BU). The overall plant load factor (PLF) for the company stood at 82.9%, up by a marginal 49bp yoy. Power generation during the quarter was affected due to fuel supply issues in some of the plants, maintenance-related shutdown and backdown of plants due to monsoons. ESO grew by 3.5% yoy to 48.8BU during the quarter. The plant availability factor (PAF) for the company also improved for both coal and gas-based stations. PAF for coal-based plants stood at 86.5% (82.5%), up 400bp yoy, while that for gas-based plants came in at 92.1% (88.2% in 2QFY2010). PAF of gas-based plants grew because of improved gas availability. Exhibit 4: Operational performance Source: Company, Angel Research Capacity addition Currently, NTPC’s capacity stands at 32,690MW, while capacity under construction is at 16,844MW. In 2QFY2011, the company commissioned 490MW Unit6 plant at Dadri in Uttar Pradesh. Management has guided that it would add 4,150MW and 6,500MW of capacity in FY2011E and FY2012E, respectively. On a consolidated basis, the company plans to incur capex of `29,000cr during FY2011 and add 4,150MW of capacity during FY2011. Exhibit 5: Capacity addition planned for FY2011 Project MW Sipat Stage-I, Unit-I 660 Jhajjar, Unit- I &2 1,000 Korba Stage–III, Unit -7 500 NCTPP Stage–II, Unit – 6 490 Simhadri, Stage–II, Unit- 3&4 1,000 Farakka, Stage-III, Unit 6 500 Total 4,150 Source: Company, Angel Research 74 78 82 86 90 94 0 50 100 150 200 250 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Generation  PLF ‐ (RHS) BU %
NTPC |2QFY2011 Result Update October 27, 2010 4 Investment arguments Capacity addition to drive future growth: NTPC is India’s largest power generating company. Currently, the company has a capacity of 32,690MW. Having the best execution capability in the industry, management has an ambitious target of adding 22,300MW during the Eleventh Plan, thus taking its installed capacity to 50,000MW. The company has till date managed to add only 4,800MW since the beginning of the plan period, with most of its capacity addition expected to be back ended. In all, we estimate the company to add close to 15,000MW during the plan period. Earnings protected by the regulated return model: NTPC, being a Central Public Utility (CPU), is governed under the regulated return model. The CERC’s regulations for FY2010–14 increased the cap on RoE to 15.5% (on a pre-tax basis, grossed up for tax) from the earlier 14% (on a post-tax basis), which is positive for NTPC. Going ahead, with the commissioning of new capacities, the company would fall under the MAT bracket and will have to pay tax of 19.95% as against the marginal tax rate of 33.2%. This in turn would suppress the company’s pre-tax RoE to 19.4% as against the earlier 23.2%, which is a negative. NTPC to generate stable cash flows: NTPC has 85% of its overall output tied up under the long-term PPA route, which ensures power offtake, thereby ensuring stable cash flows for the company.
NTPC |2QFY2011 Result Update October 27, 2010 5 Outlook and valuation Despite being one of the lowest per capita consumers of power, India has an overall power deficit of 11%. Power demand in the country, which has grown at 6% since FY2003, has continued to outstrip supply. The escalation in power demand is expected to be robust going ahead as well, in line with healthy GDP growth estimated for the country. Apart from rising demand from the industrial segment, the domestic segment’s demand is also expected to pick up, with the Ministry of Power’s ambitious target of achieving per capita consumption of 1,000 units by 2012. With 32,690MW of capacity, NTPC has a 20% market share in the overall domestic power generation industry. The company is expected to add around 9,500MW of capacity over FY2010–12E, taking its capacity close to 42,000MW by FY2012E. We expect the company’s top line to grow at a 9.3% CAGR over FY2010–12E. At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and 2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its regulated business model, with an assured RoE and strong cash flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E estimates to arrive at a Target Price of `230. We maintain an Accumulate rating on the stock. Exhibit 6: Change in estimates (` cr) FY2011E FY2012E Earlier Revised Variation (%) Earlier Revised Variation (%) Net sales 51,605 52,584 1.9 58,520 59,927 2.4 Operating exp. 36,242 37,174 2.6 40,746 42,304 3.8 Operating profit 15,363 15,410 0.3 17,774 17,623 (0.9) Depreciation 3,440 3,506 1.9 4,096 4,195 2.4 Interest 2,239 2,239 0.0 2,844 2,844 0.0 PBT 10,699 11,266 5.3 11,849 12,085 2.0 Tax 2,675 2,816 5.3 2,674 2,657 (0.6) PAT 8,024 8,449 5.3 9,175 9,427 2.7 Source: Angel Research
NTPC |2QFY2011 Result Update October 27, 2010 6 Exhibit 7: Key assumptions Earlier estimates Revised estimates FY11E FY12E FY11E FY12E Installed capacity (MW) 35,204 41,704 35,204 41,704 Growth (%) 11 19 11 19 Sale volume (BU) 229 249 229 248 Growth (%) 5 9 5 9 Realisation (`/unit) 2.3 2.3 2.3 2.4 Growth (%) 5 3 5 5 Source: Angel Research Exhibit 8: Angel estimates v/s Bloomberg consensus Year/(`) Angel est. Bloomberg consensus Var. over consensus (%) FY2011E 9.9 11.8 (15.8) FY2012E 11.7 13.3 (11.9) Source: Angel Research, Bloomberg Exhibit 9: Recommendation summary Company Reco. CMP (`) Tgt. price (`) Upside (%) FY12E P/BV (x) FY12E P/E (x) FY2010-12E EPS CAGR (%) FY12E RoCE (%) FY12E RoE (%) CESC Buy 371 470 26.7 1.0 8.0 15.6 9.3 12.5 GIPCL Buy 115 135 17.4 1.2 9.1 28.3 8.4 12.4 NTPC Accumulate 199 230 15.7 2.2 17.9 1.9 11.3 13.0 Source: Angel Research Exhibit 10: One-year forward P/BV Band Source: Company, Angel Research 60 110 160 210 260 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 (Share Price `) Price 1.5X 2X 2.5X 3X
NTPC |2QFY2011 Result Update October 27, 2010 7 Exhibit 11: Premium in NTPC P/E to Sensex P/E Source: Company, Angel Research (40) (20) 0 20 40 60 80 100 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 (%) Prem/Disc to Sensex Historic Avg Premium
NTPC |2QFY2011 Result Update October 27, 2010 8 Profit and Loss statement (Consolidated) Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Net Operating Income 33,876 38,635 44,245 50,188 52,584 59,927 % chg 22.8 14.0 14.5 13.4 4.8 14.0 Total Expenditure 23,764 27,222 33,702 35,182 37,174 42,304 Net Raw Materials 20,953 22,219 27,347 30,188 30,920 35,236 Other Mfg costs 861 3,050 3,823 2,471 3,888 4,431 Personnel 1,411 1,953 2,533 2,523 2,366 2,637 Other 538 - - - - - EBITDA 10,112 11,413 10,544 15,006 15,410 17,623 % chg 30.0 12.9 (7.6) 42.3 2.7 14.4 (% of Net Sales) 29.9 29.5 23.8 29.9 29.3 29.4 Depreciation& Amortisation 2,100 2,206 2,495 2,894 3,506 4,195 EBIT 8,012 9,207 8,049 12,112 11,905 13,428 % chg 40.3 14.9 (12.6) 50.5 (1.7) 12.8 (% of Net Sales) 24 24 18 24 23 22 Interest & other Charges 2,010 1,858 2,144 2,078 2,239 2,844 Other Income 2,959 3,002 3,402 1,015 1,600 1,500 (% of PBT) - - - - - - Share in profit of Associates - - - - - - Recurring PBT 8,973 10,351 9,307 11,049 11,266 12,085 % chg - - - - - - Extraordinary Expense/(Inc.) 11 - - - - 1 PBT (reported) 8,961 10,351 9,307 11,049 11,266 12,084 Tax 2,063 2,881 1,215 2,211 2,816 2,657 (% of PBT) 23.0 27.8 13.1 20.0 25.0 22.0 PAT (reported) 6,898 7,470 8,092 8,837 8,449 9,427 ADJ. PAT 6,909 7,470 8,092 8,837 8,449 9,428 % chg 5.4 8.1 8.3 9.2 (4.4) 11.6 (% of Net Sales) 20.4 19.3 18.3 17.6 16.1 15.7 Basic EPS (`) 8 9 10 11 10 11 Fully Diluted EPS (`) 8 9 10 11 10 11 % chg 5.4 8.1 8.3 9.2 (4.4) 11.6
NTPC |2QFY2011 Result Update October 27, 2010 9 Balance Sheet (Consolidated) Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E SOURCES OF FUNDS Equity Share Capital 8,246 8,246 8,246 8,246 8,246 8,246 Preference Capital - - - - - - Reserves & Surplus 41,124 45,991 51,706 55,993 61,421 66,928 Shareholders’ Funds 49,369 54,236 59,951 64,239 69,388 74,894 Minority Interest 48 124 166 279 279 279 Total Loans 27,020 30,315 38,823 44,210 40,710 51,710 Deferred Tax Liability - - - 230 0 (1) Total Liabilities 76,437 84,675 98,940 108,957 110,376 126,882 APPLICATION OF FUNDS Gross Block 51,093 55,648 64,742 70,337 87,640 119,853 Less: Acc. Depreciation 25,217 27,487 29,776 32,808 36,314 40,508 Net Block 25,877 28,161 34,966 37,529 51,327 79,345 Capital Work-in-Progress 20,286 25,630 30,929 38,957 35,933 25,169 Goodwill 2 - - 1 1 1 Investments 15,143 13,447 11,696 11,778 14,653 14,653 Current Assets 26,604 26,346 33,486 33,581 22,014 24,665 Cash 13,698 15,361 17,251 16,053 8,963 9,791 Loans & Advances 8,902 5,031 9,006 6,549 6,836 7,790 Other 4,004 5,954 7,230 10,979 6,215 7,083 Current liabilities 11,475 8,908 12,137 12,908 13,787 14,678 Net Current Assets 15,129 17,438 21,349 20,672 8,464 7,716 Mis. Exp. not written off - - - 20 - (1) Total Assets 76,437 84,675 98,940 108,957 110,377 126,882
NTPC |2QFY2011 Result Update October 27, 2010 10 Cash flow statement Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Profit before tax 8,961 10,351 9,307 11,049 11,266 12,084 Depreciation 2,100 2,206 2,495 2,894 3,506 4,195 Change in Working Capital 1,813 2,063 1,367 (825) 5,395 1,449 Less: Other income 2,959 3,002 3,402 1,015 1,600 1,500 Direct taxes paid 2,063 2,881 1,215 2,211 2,816 2,657 Cash Flow from Operations 7,851 8,736 8,553 9,892 15,750 13,571 (Inc)/ Decin Fixed Assets (8,661) (9,896) (14,394) (13,623) (14,279) (21,449) (Inc)/ Dec in Investments 3,449 1,696 1,751 (82) (2,875) - (Inc)/ Dec in loans and advances - - - - - - Other income 2,959 3,002 3,402 1,015 1,600 1,500 Cash Flow from Investing (2,252) (5,198) (9,241) (12,690) (15,554) (19,949) Issue of Equity - - - - - - Inc./(Dec.) in loans 4,540 3,295 8,508 5,387 (3,500) 11,000 Dividend Paid (Incl. Tax) 3,038 3,313 3,786 3,786 3,786 3,793 Others 2,010 1,858 2,144 - - - Cash Flow from Financing (508) (1,876) 2,578 1,601 (7,286) 7,207 Inc./(Dec.) in Cash 5,091 1,662 1,890 (1,197) (7,090) 828 Opening Cash balances 8,608 13,698 15,360 17,251 16,053 8,963 Closing Cash balances 13,698 15,360 17,251 16,053 8,963 9,791
NTPC |2QFY2011 Result Update October 27, 2010 11 Key Ratios Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Valuation Ratio (x) P/E (on FDEPS) 23.8 22.0 20.3 18.6 19.4 17.4 P/CEPS 18.3 17.0 15.5 14.0 13.7 12.0 P/BV 3.3 3.0 2.7 2.6 2.4 2.2 Dividend yield (%) 1.8 2.0 2.3 2.3 2.3 2.3 EV/Sales 5.2 4.6 4.2 3.8 3.7 3.4 EV/EBITDA 17.5 15.7 17.6 12.8 12.7 11.7 EV / Total Assets 2.3 2.1 1.9 1.8 1.8 1.6 Per Share Data (`) EPS (Basic) 8.4 9.1 9.8 10.7 10.2 11.4 EPS (fully diluted) 8.4 9.1 9.8 10.7 10.2 11.4 Cash EPS 10.9 11.7 12.8 14.2 14.5 16.5 DPS 3.7 4.0 4.6 4.6 4.6 4.6 Book Value 59.9 65.8 72.7 77.9 84.5 91.2 DuPont Analysis EBIT margin 23.7 23.8 18.2 24.1 22.6 22.4 Tax retention ratio 77.0 72.2 86.9 80.0 75.0 78.0 Asset turnover (x) 0.6 0.6 0.6 0.6 0.5 0.5 ROIC (Post-tax) 10.2 10.1 9.3 11.1 9.2 9.6 Cost of Debt (Post Tax) 6.3 4.7 5.4 4.0 4.0 4.8 Leverage (x) 0.3 0.3 0.3 0.4 0.4 0.5 Operating ROE 11.3 11.6 10.5 13.9 11.5 12.0 Returns (%) ROCE (Pre-tax) 11.1 11.4 8.8 11.7 10.9 11.3 Angel ROIC (Pre-tax) 19.0 21.5 17.1 23.2 20.0 17.1 ROE 14.6 14.4 14.2 14.2 12.6 13.0 Turnover ratios (x) Asset Turnover (Gross Block) 1 1 1 1 1 1 Inventory / Sales (days) 27 26 26 25 26 27 Receivables (days) 13 22 29 40 32 14 Payables (days) 157 137 114 130 131 123 Working cap cycle (ex-cash) (days) 13 17 25 32 14 (8) Solvency ratios (x) Net debt to equity 0.3 0.3 0.4 0.4 0.5 0.6 Net debt to EBITDA 1.3 1.3 2.0 1.9 2.0 2.4 Interest Coverage (EBIT / Interest) 4.0 5.0 3.8 5.8 5.3 4.7
NTPC |2QFY2011 Result Update October 27, 2010 12 Disclosure of Interest Statement NTPC 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock Yes 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%) Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

More Related Content

PDF
Pcb ru2 qfy2011-291010
Angel Broking
 
PDF
9M 2021 Consolidated results
Snam
 
PDF
Ht media ru2 qfy2011-281010
Angel Broking
 
PDF
progress energy Q1 05 earnings release
finance25
 
PDF
dte_q206er
finance41
 
PDF
ERG - 4Q 2014 Results
ERG S.p.A.
 
PDF
Project rashmi steel
Ranadeep Poddar
 
PDF
1 q12 results presentation
MagnesitaRI
 
Pcb ru2 qfy2011-291010
Angel Broking
 
9M 2021 Consolidated results
Snam
 
Ht media ru2 qfy2011-281010
Angel Broking
 
progress energy Q1 05 earnings release
finance25
 
dte_q206er
finance41
 
ERG - 4Q 2014 Results
ERG S.p.A.
 
Project rashmi steel
Ranadeep Poddar
 
1 q12 results presentation
MagnesitaRI
 

What's hot (11)

PPTX
PwC_Case_Competition_Baker_Hughes_Final_Round
Evan Chen
 
PDF
Bruker q1 2014 earnings presentation final
InvestorBruker
 
PDF
SGS 2014 Half Year Results Report
SGS
 
PDF
Liquefied Natural Gas Limited Year-End Financial Report - June 30, 2016
Marcellus Drilling News
 
PDF
energy future holindings Q106EARNINGS_FINAL
finance29
 
PDF
Eni in 2008
Eni
 
PDF
Tgi 1 h 13_conference_call
Grupo Energía Bogotá
 
DOC
Year End 2009
SKF
 
PDF
spectra energy 3QEarningsRelease
finance49
 
PDF
Presentation aes eletropaulo_3_q12_sem discurso_v2
AES Eletropaulo
 
PDF
EQT 2012 Full-Year Earnings Report
Marcellus Drilling News
 
PwC_Case_Competition_Baker_Hughes_Final_Round
Evan Chen
 
Bruker q1 2014 earnings presentation final
InvestorBruker
 
SGS 2014 Half Year Results Report
SGS
 
Liquefied Natural Gas Limited Year-End Financial Report - June 30, 2016
Marcellus Drilling News
 
energy future holindings Q106EARNINGS_FINAL
finance29
 
Eni in 2008
Eni
 
Tgi 1 h 13_conference_call
Grupo Energía Bogotá
 
Year End 2009
SKF
 
spectra energy 3QEarningsRelease
finance49
 
Presentation aes eletropaulo_3_q12_sem discurso_v2
AES Eletropaulo
 
EQT 2012 Full-Year Earnings Report
Marcellus Drilling News
 
Ad

Viewers also liked (18)

PDF
Hero Honda
Angel Broking
 
PDF
Tech report 29.10.2010
Angel Broking
 
PDF
Sterlite 2 qfy2011 271010
Angel Broking
 
PDF
Tech Mahindra Result Update 4qfy2010-040510
Angel Broking
 
PDF
Anant raj ru4 qfy2010-280510
Angel Broking
 
PDF
Derivatives report 28 apr-2010
Angel Broking
 
PDF
Tech report 25.05.2010
Angel Broking
 
PDF
Ceat
Angel Broking
 
PDF
Weekly review 29-05-10
Angel Broking
 
PDF
Derivatives report 03 may-2010
Angel Broking
 
PDF
Corporation Bank Result Update
Angel Broking
 
PDF
Educomp ru4 qfy2010-240510
Angel Broking
 
PDF
Angel Broking Weekly review 30-04-10
Angel Broking
 
PDF
Inox ru4 qfy2010-240510
Angel Broking
 
PDF
SBI
Angel Broking
 
PDF
Finolex Cables
Angel Broking
 
PDF
Market outlook 27 04-10
Angel Broking
 
PDF
GSPL
Angel Broking
 
Hero Honda
Angel Broking
 
Tech report 29.10.2010
Angel Broking
 
Sterlite 2 qfy2011 271010
Angel Broking
 
Tech Mahindra Result Update 4qfy2010-040510
Angel Broking
 
Anant raj ru4 qfy2010-280510
Angel Broking
 
Derivatives report 28 apr-2010
Angel Broking
 
Tech report 25.05.2010
Angel Broking
 
Ceat
Angel Broking
 
Weekly review 29-05-10
Angel Broking
 
Derivatives report 03 may-2010
Angel Broking
 
Corporation Bank Result Update
Angel Broking
 
Educomp ru4 qfy2010-240510
Angel Broking
 
Angel Broking Weekly review 30-04-10
Angel Broking
 
Inox ru4 qfy2010-240510
Angel Broking
 
SBI
Angel Broking
 
Finolex Cables
Angel Broking
 
Market outlook 27 04-10
Angel Broking
 
GSPL
Angel Broking
 
Ad

Similar to Ntpc 2 qfy11 result update - 271010 (20)

PDF
Ptc 2 qfy2011 281010-291010
Angel Broking
 
PDF
NTPC Ltd.Q2FY Result Update
choice broking
 
PDF
NTPC
Angel Broking
 
PDF
Stockscape Presentation (1).pdf ahndoewhohdoqb
ltaj021106
 
PDF
Ntpc ru4 qfy2010-190510
Angel Broking
 
PPTX
fundamental analysis and valuation of public sector power companies
Nitin Jaggi
 
PDF
presentation-16th-analysts-investors-meet-held-17082020.pdf
Mohit970780
 
PDF
Ntpc ltd -_natsons_research_8-09-2008
Pulicherla Ramesh
 
PDF
ntpc annual presentation
Sid Atreya | MBA | B.Eng
 
PPTX
Du pont analysis
Siddhi Modi
 
PDF
ICICIdirect_PTC_Report
Jitesh Bhanot
 
PPTX
Strategic analysis of NTPC Ltd.
sapna moodautia
 
PDF
Ptc India
Angel Broking
 
DOCX
Ntpc
manishpundir03
 
DOCX
project_001.docx
ParthaSarathiBehera9
 
PDF
Project Report on Industrial Summer Training at NTPC Simhadri
Ashish Uppu
 
DOCX
Performance-management-system-at-ntpc
Amrita Singh
 
PDF
ntpc anta training report
nishant pareek
 
PDF
Ntpc information
NTPC
 
PDF
gas power plant ntpc dadri
Virat Shishodia
 
Ptc 2 qfy2011 281010-291010
Angel Broking
 
NTPC Ltd.Q2FY Result Update
choice broking
 
NTPC
Angel Broking
 
Stockscape Presentation (1).pdf ahndoewhohdoqb
ltaj021106
 
Ntpc ru4 qfy2010-190510
Angel Broking
 
fundamental analysis and valuation of public sector power companies
Nitin Jaggi
 
presentation-16th-analysts-investors-meet-held-17082020.pdf
Mohit970780
 
Ntpc ltd -_natsons_research_8-09-2008
Pulicherla Ramesh
 
ntpc annual presentation
Sid Atreya | MBA | B.Eng
 
Du pont analysis
Siddhi Modi
 
ICICIdirect_PTC_Report
Jitesh Bhanot
 
Strategic analysis of NTPC Ltd.
sapna moodautia
 
Ptc India
Angel Broking
 
Ntpc
manishpundir03
 
project_001.docx
ParthaSarathiBehera9
 
Project Report on Industrial Summer Training at NTPC Simhadri
Ashish Uppu
 
Performance-management-system-at-ntpc
Amrita Singh
 
ntpc anta training report
nishant pareek
 
Ntpc information
NTPC
 
gas power plant ntpc dadri
Virat Shishodia
 

More from Angel Broking (20)

PDF
Market outlook 110612
Angel Broking
 
PDF
Axis%20 bank ru1qfy2012-220711
Angel Broking
 
PDF
Electrosteel castings
Angel Broking
 
PDF
Persistent systems
Angel Broking
 
PDF
Ht media
Angel Broking
 
PDF
Derivative report 19th July 2011
Angel Broking
 
PDF
Market outlook 19th July 2011
Angel Broking
 
PDF
Telecom sector
Angel Broking
 
PDF
Weekly Report 18th July 2011
Angel Broking
 
PDF
Derivative Report 18th July 2011
Angel Broking
 
PDF
Technical Report 18th July 2011
Angel Broking
 
PDF
Market Outlook 18th July 2011
Angel Broking
 
PDF
South Indian Bank
Angel Broking
 
PDF
Bajaj auto Result Updated
Angel Broking
 
PDF
Tata consultancy services
Angel Broking
 
PDF
Fc4 e63c4d01
Angel Broking
 
PDF
Derivatives Report 15th July 2011
Angel Broking
 
PDF
Technical Report 15th July 2011
Angel Broking
 
PDF
Infosys Result Updated
Angel Broking
 
PDF
Derivative Report 13th July 2011
Angel Broking
 
Market outlook 110612
Angel Broking
 
Axis%20 bank ru1qfy2012-220711
Angel Broking
 
Electrosteel castings
Angel Broking
 
Persistent systems
Angel Broking
 
Ht media
Angel Broking
 
Derivative report 19th July 2011
Angel Broking
 
Market outlook 19th July 2011
Angel Broking
 
Telecom sector
Angel Broking
 
Weekly Report 18th July 2011
Angel Broking
 
Derivative Report 18th July 2011
Angel Broking
 
Technical Report 18th July 2011
Angel Broking
 
Market Outlook 18th July 2011
Angel Broking
 
South Indian Bank
Angel Broking
 
Bajaj auto Result Updated
Angel Broking
 
Tata consultancy services
Angel Broking
 
Fc4 e63c4d01
Angel Broking
 
Derivatives Report 15th July 2011
Angel Broking
 
Technical Report 15th July 2011
Angel Broking
 
Infosys Result Updated
Angel Broking
 
Derivative Report 13th July 2011
Angel Broking
 

Recently uploaded (20)

PDF
The Right Social Media Strategy Can Transform Your Business
SEO Strikers
 
PPTX
Q1 PE AND HEALTH 5 WEEK 5 DAY 1 powerpoint template
RobieDeLeon1
 
PDF
Statistics for Management and Economics Keller 10th Edition by Gerald Keller ...
solutionsmanual3
 
PDF
3CMT J.AFABLE Flexible-Learning ENTREPRENEURIAL MANAGEMENT.pdf
robinayo
 
PDF
THE EFFECT OF FOREIGN AID ON ECONOMIC GROWTH IN ETHIOPIA
BALEMLAY ADDIS
 
PPT
features and equilibrium under MONOPOLY 17.11.20.ppt
ruchisharma415837
 
PPTX
lesson in englishhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
JERALLIROSEVALENCIAH
 
PDF
Pitch Deck.pdf .pdf all about finance in
k3aamanda
 
PPTX
Maths science sst hindi english cucumber
shreyachinnari83
 
PDF
Monthly Economic Monitoring of Ukraine No. 247
Інститут економічних досліджень та політичних консультацій
 
PDF
International Financial Management, 9th Edition, Cheol Eun, Bruce Resnick Tuu...
solutions manual team
 
PDF
Buy Verified Payoneer Accounts for Sale - Secure and.pdf
Buy Verified Linkedin Accounts
 
PPTX
Very useful ppt for your banking assignments Banking.pptx
smitraiyni07
 
PPTX
INDIAN FINANCIAL SYSTEM (Financial institutions, Financial Markets & Services)
SAYANTAN GUHA MAZUMDER
 
PDF
Buy Verified Stripe Accounts for Sale - Secure and.pdf
qqb33647
 
PPT
CompanionAsset_9780128146378_Chapter04.ppt
PENGFEIGAO7
 
PPTX
General-Characteristics-of-Microorganisms.pptx
neilfrancisfernandez
 
PDF
Unkipdf.pdf of work in the economy we are
k3aamanda
 
PPTX
28 - relative valuation lecture economicsnotes
ShashankShetty45
 
PDF
Pension Trustee Training (1).pdf From Salih Shah
Henry Tapper
 
The Right Social Media Strategy Can Transform Your Business
SEO Strikers
 
Q1 PE AND HEALTH 5 WEEK 5 DAY 1 powerpoint template
RobieDeLeon1
 
Statistics for Management and Economics Keller 10th Edition by Gerald Keller ...
solutionsmanual3
 
3CMT J.AFABLE Flexible-Learning ENTREPRENEURIAL MANAGEMENT.pdf
robinayo
 
THE EFFECT OF FOREIGN AID ON ECONOMIC GROWTH IN ETHIOPIA
BALEMLAY ADDIS
 
features and equilibrium under MONOPOLY 17.11.20.ppt
ruchisharma415837
 
lesson in englishhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
JERALLIROSEVALENCIAH
 
Pitch Deck.pdf .pdf all about finance in
k3aamanda
 
Maths science sst hindi english cucumber
shreyachinnari83
 
Monthly Economic Monitoring of Ukraine No. 247
Інститут економічних досліджень та політичних консультацій
 
International Financial Management, 9th Edition, Cheol Eun, Bruce Resnick Tuu...
solutions manual team
 
Buy Verified Payoneer Accounts for Sale - Secure and.pdf
Buy Verified Linkedin Accounts
 
Very useful ppt for your banking assignments Banking.pptx
smitraiyni07
 
INDIAN FINANCIAL SYSTEM (Financial institutions, Financial Markets & Services)
SAYANTAN GUHA MAZUMDER
 
Buy Verified Stripe Accounts for Sale - Secure and.pdf
qqb33647
 
CompanionAsset_9780128146378_Chapter04.ppt
PENGFEIGAO7
 
General-Characteristics-of-Microorganisms.pptx
neilfrancisfernandez
 
Unkipdf.pdf of work in the economy we are
k3aamanda
 
28 - relative valuation lecture economicsnotes
ShashankShetty45
 
Pension Trustee Training (1).pdf From Salih Shah
Henry Tapper
 

Ntpc 2 qfy11 result update - 271010

  • 1. Please refer to important disclosures at the end of this report 1 Y/E March (` cr) 2QFY2011 1QFY2011 % chg qoq 2QFY2010 % chg yoy Net sales 13,350 13,303 0.3 11,253 20.5 Operating profit 3,371 3,345 0.8 3,684 (8.5) OPM (%) 25.3 25.1 11bp 32.7 (748bp) Rep. net profit 2,107 1,842 14.4 2,151 (2.0) Source: Company, Angel Research During 2QFY2011, NTPC’s adjusted net profit declined by 17.8% yoy to `1,845cr, which was in line with our estimates. During the quarter, bottom-line performance was affected by under recovery of fixed costs in new plants, lower other income due to lower interest rates and reduction in tax saving bonds. We maintain Accumulate on the stock with a Target Price of `230. Top-line growth at 20.5% yoy: NTPC posted robust top-line growth of 20.5% yoy to `13,350cr in 2QFY2011, primarily driven by higher realisations as Energy Sent Out (ESO) grew by modest 3.5%, despite the 1,480MW capacity addition since 2QFY2010. Power generation during the quarter was affected by fuel supply issues, maintenance-related shutdown and backdown of plants due to monsoons. OPM fell by 748bp yoy to 25.3% due to higher fuel costs and other expenses. NTPC’s reported net profit was down by 2% yoy to `2,107cr. During the quarter, the company benefitted from extraordinary income of `1,763cr due to the write-back of depreciation and advance against depreciation (AAD) recognised as prior-period sale, which boosted its bottom line. However, the company also made a provision of `1,263cr with respect to sundry debtors, which impacted its bottom line. Valuation: At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and 2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its regulated business model, with an assured return on equity (RoE) and strong cash flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E estimates to arrive at a Target Price of `230. We maintain Accumulate on the stock. Key Financials (Consolidated) Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E Net sales 44,245 50,188 52,584 59,927 % chg 14.5 13.4 4.8 14.0 Net profit 8,092 8,837 8,449 9,427 % chg 8.3 9.2 (4.4) 11.6 OPM (%) 23.8 29.9 29.3 29.4 EPS (`) 9.8 10.7 10.2 11.4 P/E (x) 20.3 18.5 19.4 17.4 P/BV (x) 2.7 2.6 2.4 2.2 RoE (%) 14.2 14.2 12.6 13.0 RoCE (%) 8.8 11.7 10.9 11.3 EV/Sales (x) 4.2 3.8 3.7 3.4 EV/EBITDA (x) 17.6 12.8 12.7 11.7 Source: Company, Angel Research ACCUMULATE CMP `199 Target Price `230 Investment Period 12 Months Stock Info Sector Bloomberg Code Shareholding Pattern (%) Promoters 84.5 MF / Banks / Indian Fls 10.4 FII / NRIs / OCBs 2.9 Indian Public / Others 2.2 Abs. (%) 3m 1yr 3yr Sensex 10.7 22.3 4.0 NTPC (1.3) (8.6) (13.1) 10 20,005 6,013 NTPC.BO NATP@IN Face Value (Rs) BSE Sensex Nifty Reuters Code 163,879 0.6 242/190 504866 Power Avg. Daily Volume Market Cap (Rs cr) Beta 52 Week High / Low Rupesh Sankhe 022-40403800 Ext: 319 rupeshd.sankhe@angelbroking.com V Srinivasan 022-40403800 Ext: 330 v.srinivasan@angelbroking.com NTPC Performance Highlights 2QFY2011 Result Update | Power October 27, 2010
  • 2. NTPC |2QFY2011 Result Update October 27, 2010 2 Exhibit 1: 2QFY2011 performance – Standalone Y/E March (` cr) 2QFY2011 1QFY2011 %Chg qoq 2QFY2010 % Chg yoy 1HFY2011 1HFY2010 % Chg Net Sales 12,989 12,944 0.3 10,783 20.5 25,934 22,785 13.8 Other Operating Income 361 358 0.9 470 (23.1) 719 995 (27.7) Total Operating Income 13,350 13,303 0.4 11,253 18.6 26,653 23,781 12.1 Fuel Cost 8,607 8,702 (1.1) 6,607 30.3 17,310 14,350 20.6 (% of Sales) 66 67 61 67 63 Staff Costs 709 684 3.7 504 40.7 1,393 1,094 27.3 (% of Sales) 5 5 5 5 5 Other Expenses 662.8 572 15.9 458 44.6 1,234 950 29.9 (% of Sales) 5 4 4 5 4 Total Expenditure 9,979 9,958 0.2 7,569 31.8 19,937 16,394 21.6 Operating Profit 3,371 3,345 0.8 3,684 (8.5) 6,716 7,386 (9.1) OPM 25.3 25.1 32.7 25.9 32.4 Interest 590 536 10.2 541 9.2 1,126 985 14.3 Depreciation 506 683 (25.8) 644 (21.4) 1,189 1,257 (5.4) Other Income 254 227 11.8 270 (6.1) 480 521 (7.8) PBT (excl. Extr. Items) 2,528 2,353 7.4 2,769 (8.7) 4,882 5,665 (13.8) Extr. Income/(Expense) 501 - - 501 (1) PBT (incl. Extr. Items) 3,029 2,353 28.7 2,769 9.4 5,383 5,664 (5.0) (% of Sales) 23 18 26 21 25 Provision for Taxation 922 511 80.2 618 49.0 1,433 1,319 8.6 (% of PBT) 30 22 22 27 23 Reported PAT 2,107 1,842 14.4 2,151 (2.0) 3,950 4,344 (9.1) PATM 16 14 20 15 19 Equity Capital 8,245 8,245 8,246 8,245 8,245 EPS (`) 2.6 2.2 2.6 4.8 5.3 Source: Company, Angel Research Exhibit 2: 2QFY2011- Actual v/s Angel estimates (` cr) Actual Estimates Variation (%) Net sales 13,350 13,395 (0.3) Operating profit 3,371 3,211 5.0 Net profit 2,107 1,845 14.2 Source: Company, Angel Research Exhibit 3: Details of one-off items Reported PAT (` cr) 2,107 Prior-period sales ( 181) Prior-period adjustments (1,769) Prior-period depreciation 106 Prior-period provision 1,262 Tax 162 Reduction in fixed charges 252 Others ( 94) Adjusted PAT 1,847 Source: Company, Angel Research
  • 3. NTPC |2QFY2011 Result Update October 27, 2010 3 Operational highlights During the quarter, NTPC’s generation volumes grew by 3.7% yoy to 52.2BU (50.4BU). The overall plant load factor (PLF) for the company stood at 82.9%, up by a marginal 49bp yoy. Power generation during the quarter was affected due to fuel supply issues in some of the plants, maintenance-related shutdown and backdown of plants due to monsoons. ESO grew by 3.5% yoy to 48.8BU during the quarter. The plant availability factor (PAF) for the company also improved for both coal and gas-based stations. PAF for coal-based plants stood at 86.5% (82.5%), up 400bp yoy, while that for gas-based plants came in at 92.1% (88.2% in 2QFY2010). PAF of gas-based plants grew because of improved gas availability. Exhibit 4: Operational performance Source: Company, Angel Research Capacity addition Currently, NTPC’s capacity stands at 32,690MW, while capacity under construction is at 16,844MW. In 2QFY2011, the company commissioned 490MW Unit6 plant at Dadri in Uttar Pradesh. Management has guided that it would add 4,150MW and 6,500MW of capacity in FY2011E and FY2012E, respectively. On a consolidated basis, the company plans to incur capex of `29,000cr during FY2011 and add 4,150MW of capacity during FY2011. Exhibit 5: Capacity addition planned for FY2011 Project MW Sipat Stage-I, Unit-I 660 Jhajjar, Unit- I &2 1,000 Korba Stage–III, Unit -7 500 NCTPP Stage–II, Unit – 6 490 Simhadri, Stage–II, Unit- 3&4 1,000 Farakka, Stage-III, Unit 6 500 Total 4,150 Source: Company, Angel Research 74 78 82 86 90 94 0 50 100 150 200 250 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Generation  PLF ‐ (RHS) BU %
  • 4. NTPC |2QFY2011 Result Update October 27, 2010 4 Investment arguments Capacity addition to drive future growth: NTPC is India’s largest power generating company. Currently, the company has a capacity of 32,690MW. Having the best execution capability in the industry, management has an ambitious target of adding 22,300MW during the Eleventh Plan, thus taking its installed capacity to 50,000MW. The company has till date managed to add only 4,800MW since the beginning of the plan period, with most of its capacity addition expected to be back ended. In all, we estimate the company to add close to 15,000MW during the plan period. Earnings protected by the regulated return model: NTPC, being a Central Public Utility (CPU), is governed under the regulated return model. The CERC’s regulations for FY2010–14 increased the cap on RoE to 15.5% (on a pre-tax basis, grossed up for tax) from the earlier 14% (on a post-tax basis), which is positive for NTPC. Going ahead, with the commissioning of new capacities, the company would fall under the MAT bracket and will have to pay tax of 19.95% as against the marginal tax rate of 33.2%. This in turn would suppress the company’s pre-tax RoE to 19.4% as against the earlier 23.2%, which is a negative. NTPC to generate stable cash flows: NTPC has 85% of its overall output tied up under the long-term PPA route, which ensures power offtake, thereby ensuring stable cash flows for the company.
  • 5. NTPC |2QFY2011 Result Update October 27, 2010 5 Outlook and valuation Despite being one of the lowest per capita consumers of power, India has an overall power deficit of 11%. Power demand in the country, which has grown at 6% since FY2003, has continued to outstrip supply. The escalation in power demand is expected to be robust going ahead as well, in line with healthy GDP growth estimated for the country. Apart from rising demand from the industrial segment, the domestic segment’s demand is also expected to pick up, with the Ministry of Power’s ambitious target of achieving per capita consumption of 1,000 units by 2012. With 32,690MW of capacity, NTPC has a 20% market share in the overall domestic power generation industry. The company is expected to add around 9,500MW of capacity over FY2010–12E, taking its capacity close to 42,000MW by FY2012E. We expect the company’s top line to grow at a 9.3% CAGR over FY2010–12E. At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and 2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its regulated business model, with an assured RoE and strong cash flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E estimates to arrive at a Target Price of `230. We maintain an Accumulate rating on the stock. Exhibit 6: Change in estimates (` cr) FY2011E FY2012E Earlier Revised Variation (%) Earlier Revised Variation (%) Net sales 51,605 52,584 1.9 58,520 59,927 2.4 Operating exp. 36,242 37,174 2.6 40,746 42,304 3.8 Operating profit 15,363 15,410 0.3 17,774 17,623 (0.9) Depreciation 3,440 3,506 1.9 4,096 4,195 2.4 Interest 2,239 2,239 0.0 2,844 2,844 0.0 PBT 10,699 11,266 5.3 11,849 12,085 2.0 Tax 2,675 2,816 5.3 2,674 2,657 (0.6) PAT 8,024 8,449 5.3 9,175 9,427 2.7 Source: Angel Research
  • 6. NTPC |2QFY2011 Result Update October 27, 2010 6 Exhibit 7: Key assumptions Earlier estimates Revised estimates FY11E FY12E FY11E FY12E Installed capacity (MW) 35,204 41,704 35,204 41,704 Growth (%) 11 19 11 19 Sale volume (BU) 229 249 229 248 Growth (%) 5 9 5 9 Realisation (`/unit) 2.3 2.3 2.3 2.4 Growth (%) 5 3 5 5 Source: Angel Research Exhibit 8: Angel estimates v/s Bloomberg consensus Year/(`) Angel est. Bloomberg consensus Var. over consensus (%) FY2011E 9.9 11.8 (15.8) FY2012E 11.7 13.3 (11.9) Source: Angel Research, Bloomberg Exhibit 9: Recommendation summary Company Reco. CMP (`) Tgt. price (`) Upside (%) FY12E P/BV (x) FY12E P/E (x) FY2010-12E EPS CAGR (%) FY12E RoCE (%) FY12E RoE (%) CESC Buy 371 470 26.7 1.0 8.0 15.6 9.3 12.5 GIPCL Buy 115 135 17.4 1.2 9.1 28.3 8.4 12.4 NTPC Accumulate 199 230 15.7 2.2 17.9 1.9 11.3 13.0 Source: Angel Research Exhibit 10: One-year forward P/BV Band Source: Company, Angel Research 60 110 160 210 260 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 (Share Price `) Price 1.5X 2X 2.5X 3X
  • 7. NTPC |2QFY2011 Result Update October 27, 2010 7 Exhibit 11: Premium in NTPC P/E to Sensex P/E Source: Company, Angel Research (40) (20) 0 20 40 60 80 100 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 (%) Prem/Disc to Sensex Historic Avg Premium
  • 8. NTPC |2QFY2011 Result Update October 27, 2010 8 Profit and Loss statement (Consolidated) Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Net Operating Income 33,876 38,635 44,245 50,188 52,584 59,927 % chg 22.8 14.0 14.5 13.4 4.8 14.0 Total Expenditure 23,764 27,222 33,702 35,182 37,174 42,304 Net Raw Materials 20,953 22,219 27,347 30,188 30,920 35,236 Other Mfg costs 861 3,050 3,823 2,471 3,888 4,431 Personnel 1,411 1,953 2,533 2,523 2,366 2,637 Other 538 - - - - - EBITDA 10,112 11,413 10,544 15,006 15,410 17,623 % chg 30.0 12.9 (7.6) 42.3 2.7 14.4 (% of Net Sales) 29.9 29.5 23.8 29.9 29.3 29.4 Depreciation& Amortisation 2,100 2,206 2,495 2,894 3,506 4,195 EBIT 8,012 9,207 8,049 12,112 11,905 13,428 % chg 40.3 14.9 (12.6) 50.5 (1.7) 12.8 (% of Net Sales) 24 24 18 24 23 22 Interest & other Charges 2,010 1,858 2,144 2,078 2,239 2,844 Other Income 2,959 3,002 3,402 1,015 1,600 1,500 (% of PBT) - - - - - - Share in profit of Associates - - - - - - Recurring PBT 8,973 10,351 9,307 11,049 11,266 12,085 % chg - - - - - - Extraordinary Expense/(Inc.) 11 - - - - 1 PBT (reported) 8,961 10,351 9,307 11,049 11,266 12,084 Tax 2,063 2,881 1,215 2,211 2,816 2,657 (% of PBT) 23.0 27.8 13.1 20.0 25.0 22.0 PAT (reported) 6,898 7,470 8,092 8,837 8,449 9,427 ADJ. PAT 6,909 7,470 8,092 8,837 8,449 9,428 % chg 5.4 8.1 8.3 9.2 (4.4) 11.6 (% of Net Sales) 20.4 19.3 18.3 17.6 16.1 15.7 Basic EPS (`) 8 9 10 11 10 11 Fully Diluted EPS (`) 8 9 10 11 10 11 % chg 5.4 8.1 8.3 9.2 (4.4) 11.6
  • 9. NTPC |2QFY2011 Result Update October 27, 2010 9 Balance Sheet (Consolidated) Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E SOURCES OF FUNDS Equity Share Capital 8,246 8,246 8,246 8,246 8,246 8,246 Preference Capital - - - - - - Reserves & Surplus 41,124 45,991 51,706 55,993 61,421 66,928 Shareholders’ Funds 49,369 54,236 59,951 64,239 69,388 74,894 Minority Interest 48 124 166 279 279 279 Total Loans 27,020 30,315 38,823 44,210 40,710 51,710 Deferred Tax Liability - - - 230 0 (1) Total Liabilities 76,437 84,675 98,940 108,957 110,376 126,882 APPLICATION OF FUNDS Gross Block 51,093 55,648 64,742 70,337 87,640 119,853 Less: Acc. Depreciation 25,217 27,487 29,776 32,808 36,314 40,508 Net Block 25,877 28,161 34,966 37,529 51,327 79,345 Capital Work-in-Progress 20,286 25,630 30,929 38,957 35,933 25,169 Goodwill 2 - - 1 1 1 Investments 15,143 13,447 11,696 11,778 14,653 14,653 Current Assets 26,604 26,346 33,486 33,581 22,014 24,665 Cash 13,698 15,361 17,251 16,053 8,963 9,791 Loans & Advances 8,902 5,031 9,006 6,549 6,836 7,790 Other 4,004 5,954 7,230 10,979 6,215 7,083 Current liabilities 11,475 8,908 12,137 12,908 13,787 14,678 Net Current Assets 15,129 17,438 21,349 20,672 8,464 7,716 Mis. Exp. not written off - - - 20 - (1) Total Assets 76,437 84,675 98,940 108,957 110,377 126,882
  • 10. NTPC |2QFY2011 Result Update October 27, 2010 10 Cash flow statement Y/E March (` cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Profit before tax 8,961 10,351 9,307 11,049 11,266 12,084 Depreciation 2,100 2,206 2,495 2,894 3,506 4,195 Change in Working Capital 1,813 2,063 1,367 (825) 5,395 1,449 Less: Other income 2,959 3,002 3,402 1,015 1,600 1,500 Direct taxes paid 2,063 2,881 1,215 2,211 2,816 2,657 Cash Flow from Operations 7,851 8,736 8,553 9,892 15,750 13,571 (Inc)/ Decin Fixed Assets (8,661) (9,896) (14,394) (13,623) (14,279) (21,449) (Inc)/ Dec in Investments 3,449 1,696 1,751 (82) (2,875) - (Inc)/ Dec in loans and advances - - - - - - Other income 2,959 3,002 3,402 1,015 1,600 1,500 Cash Flow from Investing (2,252) (5,198) (9,241) (12,690) (15,554) (19,949) Issue of Equity - - - - - - Inc./(Dec.) in loans 4,540 3,295 8,508 5,387 (3,500) 11,000 Dividend Paid (Incl. Tax) 3,038 3,313 3,786 3,786 3,786 3,793 Others 2,010 1,858 2,144 - - - Cash Flow from Financing (508) (1,876) 2,578 1,601 (7,286) 7,207 Inc./(Dec.) in Cash 5,091 1,662 1,890 (1,197) (7,090) 828 Opening Cash balances 8,608 13,698 15,360 17,251 16,053 8,963 Closing Cash balances 13,698 15,360 17,251 16,053 8,963 9,791
  • 11. NTPC |2QFY2011 Result Update October 27, 2010 11 Key Ratios Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Valuation Ratio (x) P/E (on FDEPS) 23.8 22.0 20.3 18.6 19.4 17.4 P/CEPS 18.3 17.0 15.5 14.0 13.7 12.0 P/BV 3.3 3.0 2.7 2.6 2.4 2.2 Dividend yield (%) 1.8 2.0 2.3 2.3 2.3 2.3 EV/Sales 5.2 4.6 4.2 3.8 3.7 3.4 EV/EBITDA 17.5 15.7 17.6 12.8 12.7 11.7 EV / Total Assets 2.3 2.1 1.9 1.8 1.8 1.6 Per Share Data (`) EPS (Basic) 8.4 9.1 9.8 10.7 10.2 11.4 EPS (fully diluted) 8.4 9.1 9.8 10.7 10.2 11.4 Cash EPS 10.9 11.7 12.8 14.2 14.5 16.5 DPS 3.7 4.0 4.6 4.6 4.6 4.6 Book Value 59.9 65.8 72.7 77.9 84.5 91.2 DuPont Analysis EBIT margin 23.7 23.8 18.2 24.1 22.6 22.4 Tax retention ratio 77.0 72.2 86.9 80.0 75.0 78.0 Asset turnover (x) 0.6 0.6 0.6 0.6 0.5 0.5 ROIC (Post-tax) 10.2 10.1 9.3 11.1 9.2 9.6 Cost of Debt (Post Tax) 6.3 4.7 5.4 4.0 4.0 4.8 Leverage (x) 0.3 0.3 0.3 0.4 0.4 0.5 Operating ROE 11.3 11.6 10.5 13.9 11.5 12.0 Returns (%) ROCE (Pre-tax) 11.1 11.4 8.8 11.7 10.9 11.3 Angel ROIC (Pre-tax) 19.0 21.5 17.1 23.2 20.0 17.1 ROE 14.6 14.4 14.2 14.2 12.6 13.0 Turnover ratios (x) Asset Turnover (Gross Block) 1 1 1 1 1 1 Inventory / Sales (days) 27 26 26 25 26 27 Receivables (days) 13 22 29 40 32 14 Payables (days) 157 137 114 130 131 123 Working cap cycle (ex-cash) (days) 13 17 25 32 14 (8) Solvency ratios (x) Net debt to equity 0.3 0.3 0.4 0.4 0.5 0.6 Net debt to EBITDA 1.3 1.3 2.0 1.9 2.0 2.4 Interest Coverage (EBIT / Interest) 4.0 5.0 3.8 5.8 5.3 4.7
  • 12. NTPC |2QFY2011 Result Update October 27, 2010 12 Disclosure of Interest Statement NTPC 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock Yes 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%) Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.