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Recommendations India

NTPC 3QFY2014 performance highlights and results update

January 31, 2014, Friday, 09:50 GMT | 04:50 EST | 14:20 IST | 16:50 SGT
Contributed by Angel Broking

For 3QFY2014, NTPC reported a robust set of numbers. The company’s top-line grew by 19.0% yoy and came in at Rs.18,779cr vis-à-vis Rs.15,775cr in 3QFY2013, exceeding our expectations. Generation revenues also increased to Rs.18,883cr vis-à-vis Rs.15,839cr in 3QFY2013 even though generation had seen a decline of 1.7% yoy from 60.1bn units (BU) in 3QFY2013 to 59.1BU in the current quarter. However, the EBITDA margin saw a drop of 67bp yoy to 24.7% from 25.3% in 3QFY2013, majorly due to an increase in employee expenses. Meanwhile, the net profit increased by 10.2% yoy to Rs.2,861cr (Rs.2,597cr in 3QFY2013).
Operational performance: NTPC reported a 656bp yoy increase in plant availability factor (PAF) at 95.1% (88.5% in 3QFY2013) for coal-based plants, whereas the PAF for gas-based plants increased by 603bp yoy at 99.8% (93.8% in 3QFY2013). Gross generation for the quarter was lower yoy at 59.1BU (60.1BU in 3QFY2013) and saw a decline for 9MFY2014 as well at 170.6BU (171.7BU in 9MFY2013). The plant load factor (PLF) of coal-based stations declined by 165bp yoy to 82.4% for 3QFY2014 as against 84.1% for 3QFY2013. For 9MFY2014 the PLF was lower by 264bp at 79.1% as against 81.8% in 9MFY2013.
Fuel supply: NTPC received 38.0mn tonne (mt) of domestic coal in 3QFY2014 as against 38.2mt in 3QFY2013, a slight decline of 0.5% yoy. The company reduced the procurement of imported coal by 57.1% yoy to 1.2mt during the quarter from 2.8mt in 3QFY2013, majorly due to increased availability of domestic coal. Meanwhile, NTPC consumed 6.9mmscmd gas in 3QFY2014 (10.7mmscmd in 3QFY2013), a decline of 35.2% yoy, majorly on account of unavailability of gas.
Outlook and valuation: We expect NTPC to register a CAGR of ~6-7% in its top-line over FY2013-FY2015E on back of its ongoing capacity addition plans. The stock is currently trading at cheap valuations of 1.2x FY2014E and 1.1x FY2015E P/BV. Considering NTPC’s regulated equity model, assured fuel supply and on-going capacity addition plans; however remaining cautious over the effects of the final CERC Regulations 2014-2019 which are due soon, we recommend an Accumulate rating on the stock with a target price of Rs.146.