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NTPC 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, on a standalone basis, NTPC reported a 10.2% yoy decline in its net profit to Rs.2,130cr due to poor coal supply (and the resultant under recoveries and low incentives) and deteriorating health of SEBs (resulting in lower offtake and lower generation-linked incentives). The company’s adjusted net profit (after making adjustments for previous years’ sales, prior-period items, write-back of provisions and other adjustments) fell by 7% yoy to Rs.2,173cr. Further, the company had advanced its maintenance activities to 3QFY2012 (from 4QFY2012), which also resulted in lower plant availability. However, coal availability improved in January, resulting in 92.7% PAF (till date for 4QFY2012) for coal-based stations. We maintain our Buy view on the stock.

Top-line growth at 14.2% yoy: NTPC reported a 14.2% yoy increase in its top line to Rs.15,332cr due to higher tariffs on account of increased fuel costs (passed on) and 1,660MW of higher commercial capacity on a yoy basis. Despite a 5.6% increase in commercial capacity, NTPC’s energy sent out (ESO) rose only by 2.5% yoy due to poor coal availability. The company’s operating profit for the quarter fell by 8.1% yoy to Rs.2,855cr due to increased coal costs, lower incentives and higher maintenance expenditure. Fuel costs increased on account of higher prices of domestic and imported coal and due to higher blending in 3QFY2012 (8.0% in 3QFY2012 vs. 5.9% in 3QFY2011).

Outlook and valuation: We expect NTPC to register a CAGR of 11.4% and 5.7% in its top line and bottom line over FY2011-13E, respectively. At the CMP of Rs.171, the stock is trading at 1.9x FY2012E and 1.7x FY2013E P/BV. We continue to maintain our Buy rating on the stock with a target price of Rs.199.