KRChoksey has recommended hold rating on NTPC with a target of Rs 190, in its August 29, 2011 research report.
“NTPC reported Q1FY12 results below our expectations. Net sales grew by 9.5% YoY and de-grew by 8.7% QoQ to Rs 14,172 crore. EBITDA margins declined by 313bps YoY and 486bps QoQ to 22.7%. Reported net profit stood at Rs 2,076 crore, up by 12.7% YoY. Adjusted net profit for Q1FY12 was Rs 2,131 crore against Rs 1,889 crore in Q1FY11.”
“Gross generation during the quarter was lower by 2% YoY and 5% sequentially. Backing down by states continued in Q1FY12 as well, impacting the generation by ~5% (2.8BU) partially offset by preponing the maintenance of some plants scheduled in Q2. Coal based generation was muted with marginal increase of 0.9% YoY to 49.1 BU while gas based generation declined by 22% YoY to 5.5 BU. We attribute lower offtake by states to their poor financial condition and increasing tariff of thermal based generation. Management reiterated during the Analyst Meet that it has complete fuel supply arrangement for all its plants including under construction ones. By 2017, NTPC targets to procure 20% of its coal requirement from own mines, 70% through linkages and balance through imported coal. Management is also confident of regaining 3 coal blocks from Ministry of Coal on the ground of significant development achieved by NTPC towards the mines. Company expects 47 mtpa of coal production from all 5 blocks together by 2017.”
“RoE was grossed-up at regular tax rate during Q1FY12. However Management expects MAT rate to be applicable for the full year FY12. This means that we could see some reversal in revenue booking in Q4FY12 when NTPC reset the full year tariff at the full year applicable tax rate. We have taken MAT rate in our FY12 and FY13 estimates. Management is confident of completing bulk tendering by the end of FY12. It expects favourable result within a month from the boiler case filed by Ansaldo. All the clearances and fuel linkages are in place for 660MW units while environmental clearances for 800MW units expected very soon with fuel supply yet to be tied up.”
“We have revised our estimates marginally factoring in higher fuel cost and re-tuning the capacity addition schedule. We believe that poor financial health of SEBs, logistics constraints, higher cost of incremental debt and execution slippages would remain a concern for the company. We believe that ideal imported coal blending to optimize production cost and timely execution of capacity addition will be the key for NTPC. We downgrade NTPC to HOLD from BUY with a revised DCF based TP of Rs 190. Gross up at normal tax rate and scheduled execution provide upside risk to our target price,” says KRChoksey research report.
“NTPC reported Q1FY12 results below our expectations. Net sales grew by 9.5% YoY and de-grew by 8.7% QoQ to Rs 14,172 crore. EBITDA margins declined by 313bps YoY and 486bps QoQ to 22.7%. Reported net profit stood at Rs 2,076 crore, up by 12.7% YoY. Adjusted net profit for Q1FY12 was Rs 2,131 crore against Rs 1,889 crore in Q1FY11.”
“Gross generation during the quarter was lower by 2% YoY and 5% sequentially. Backing down by states continued in Q1FY12 as well, impacting the generation by ~5% (2.8BU) partially offset by preponing the maintenance of some plants scheduled in Q2. Coal based generation was muted with marginal increase of 0.9% YoY to 49.1 BU while gas based generation declined by 22% YoY to 5.5 BU. We attribute lower offtake by states to their poor financial condition and increasing tariff of thermal based generation. Management reiterated during the Analyst Meet that it has complete fuel supply arrangement for all its plants including under construction ones. By 2017, NTPC targets to procure 20% of its coal requirement from own mines, 70% through linkages and balance through imported coal. Management is also confident of regaining 3 coal blocks from Ministry of Coal on the ground of significant development achieved by NTPC towards the mines. Company expects 47 mtpa of coal production from all 5 blocks together by 2017.”
“RoE was grossed-up at regular tax rate during Q1FY12. However Management expects MAT rate to be applicable for the full year FY12. This means that we could see some reversal in revenue booking in Q4FY12 when NTPC reset the full year tariff at the full year applicable tax rate. We have taken MAT rate in our FY12 and FY13 estimates. Management is confident of completing bulk tendering by the end of FY12. It expects favourable result within a month from the boiler case filed by Ansaldo. All the clearances and fuel linkages are in place for 660MW units while environmental clearances for 800MW units expected very soon with fuel supply yet to be tied up.”
“We have revised our estimates marginally factoring in higher fuel cost and re-tuning the capacity addition schedule. We believe that poor financial health of SEBs, logistics constraints, higher cost of incremental debt and execution slippages would remain a concern for the company. We believe that ideal imported coal blending to optimize production cost and timely execution of capacity addition will be the key for NTPC. We downgrade NTPC to HOLD from BUY with a revised DCF based TP of Rs 190. Gross up at normal tax rate and scheduled execution provide upside risk to our target price,” says KRChoksey research report.