Emkay Global Financial Services is bullish on NTPC and has recommended buy rating on the stock with a target of Rs 204 in its October 31, 2011 research report.
“NTPC’s 2Q12 PAT of Rs24.2bn is above our estimate of Rs20.1bn. This is mainly due to previous yr sales of Rs7.6bn in the qtr. Adjusting for one offs (previous yr sales is not considered to be one-off), APAT stood at Rs25.4bn, in line (considering previous yr sales less tax on it). We have adjusted Rs2.0bn of interest and Rs2.7bn of previous yr tax in our numbers. Gross generation in the qtr declined by 3% yoy (due to lower PLF as a result of backing down instructions and coal supply issues). Revenues stood at Rs153.8bn, up 12% yoy driven by realizations (Rs3.12/unit), up 20% yoy. Realizations reflect the impact of increased fuel cost per unit of Rs2.27/unit, up 29% yoy.”
“The plant availability factor (PAF) of coal stations was very low at 83.4%. Though 2Q is the qtr in which maintenance shutdown is taken but PAF remained even lower due to coal supply issues and maintenance preponed due to lower demand. However, important to note is (1) there are no under-recoveries as cumulative PAF for 1H12 is at 86.7%, above normative level of 85% and (2) mgmt guided for much better PAF in 2H12 leading to average 90%+ PAF in FY12. NTPC is grossing up by full tax rate as the tax rate is above MAT.” NTPC has commissioned 660MW (one unit of Sipat) in 1H12. Also it commercialized 1,160MW YTDFY12. The guidance for full year commissioning is 4,320MW which is retained. In our numbers, we have assumed commissioning of 2320MW and COD of 2820 MW in the standalone entity in FY12E. In JVs, we have assumed 2000MW of commissioning and 1500MW of COD in FY12E. We reiterate that FY12 is sunset yr of 80IA and NTPC might surprise positively in commissioning and COD (otherwise it will lose on the 80-IA benefits) compared to earlier year’s negative surprises. We maintain our consolidated earnings estimate of Rs11.6 and Rs12.9/share for FY12E/FY13E.”
“At CMP of Rs179/Share, we believe valuations are reasonable at 1.9xFY13E Book with a core ROE of ~26% (additionally 1.5% as profit from JVs). We have valued (1) regulated equity of Rs350bn at the end of FY13E at 2.8x (considering 10% cost of equity), (2) equity invested in CWIP + JVs of Rs195bn at 2.3x (option value considering average turnaround time of two years) and (3) equity invested in cash and equivalents of Rs225bn at 1x (though option value remains higher). Maintain buy with price target of Rs 204 per share,” says Emkay Global Financial Services research report.
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“NTPC’s 2Q12 PAT of Rs24.2bn is above our estimate of Rs20.1bn. This is mainly due to previous yr sales of Rs7.6bn in the qtr. Adjusting for one offs (previous yr sales is not considered to be one-off), APAT stood at Rs25.4bn, in line (considering previous yr sales less tax on it). We have adjusted Rs2.0bn of interest and Rs2.7bn of previous yr tax in our numbers. Gross generation in the qtr declined by 3% yoy (due to lower PLF as a result of backing down instructions and coal supply issues). Revenues stood at Rs153.8bn, up 12% yoy driven by realizations (Rs3.12/unit), up 20% yoy. Realizations reflect the impact of increased fuel cost per unit of Rs2.27/unit, up 29% yoy.”
“The plant availability factor (PAF) of coal stations was very low at 83.4%. Though 2Q is the qtr in which maintenance shutdown is taken but PAF remained even lower due to coal supply issues and maintenance preponed due to lower demand. However, important to note is (1) there are no under-recoveries as cumulative PAF for 1H12 is at 86.7%, above normative level of 85% and (2) mgmt guided for much better PAF in 2H12 leading to average 90%+ PAF in FY12. NTPC is grossing up by full tax rate as the tax rate is above MAT.” NTPC has commissioned 660MW (one unit of Sipat) in 1H12. Also it commercialized 1,160MW YTDFY12. The guidance for full year commissioning is 4,320MW which is retained. In our numbers, we have assumed commissioning of 2320MW and COD of 2820 MW in the standalone entity in FY12E. In JVs, we have assumed 2000MW of commissioning and 1500MW of COD in FY12E. We reiterate that FY12 is sunset yr of 80IA and NTPC might surprise positively in commissioning and COD (otherwise it will lose on the 80-IA benefits) compared to earlier year’s negative surprises. We maintain our consolidated earnings estimate of Rs11.6 and Rs12.9/share for FY12E/FY13E.”
“At CMP of Rs179/Share, we believe valuations are reasonable at 1.9xFY13E Book with a core ROE of ~26% (additionally 1.5% as profit from JVs). We have valued (1) regulated equity of Rs350bn at the end of FY13E at 2.8x (considering 10% cost of equity), (2) equity invested in CWIP + JVs of Rs195bn at 2.3x (option value considering average turnaround time of two years) and (3) equity invested in cash and equivalents of Rs225bn at 1x (though option value remains higher). Maintain buy with price target of Rs 204 per share,” says Emkay Global Financial Services research report.
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