Stock Market Update on NTPC for 1QFY2012

Stock Market Update on NTPC for 1QFY2012 with an Accumulate recommendation and a Target Price of `202 (12 months)

For 1QFY2012, on a standalone basis NTPC reported a 12.7% yoy increase in net profit to `2,076cr, which is in-line with our estimates. The growth in bottom-line was aided by grossing up of revenues at corporate tax rate instead of MAT rate.  We maintain our Accumulate recommendation on the stock with a Target Price of `202.

Top-line growth at 9.5% yoy: NTPC’s 1QFY2012 top line rose by 9.5% yoy to `14,171cr. The top-line growth is low considering a 12% yoy increase in the fuel cost and 1,660MW (660MW added during 1QFY2012) of additional capacity which suggests low Plant Availability Factor during the quarter. The power generation was down by 2% yoy at 54.6BU on account of backing down by SEB’s. The average realizations stood at `2.82/unit up 13.8% on yoy basis. While the coal based recorded healthy PLF of ~85%, the PLF of gas based stations fell to 63% (~80% in 1QFY2011). OPM for the quarter stood flat on yoy basis at 22.2%.

Outlook and valuation: NTPC has signed cumulative PPAs for 1,00,000MW, the payment for which is guaranteed under tripartite agreement till FY2016 and on the basis of first charge thereafter. NTPC is well placed in terms of fuel security due to the preference it gets in domestic coal supply and ability to pass through hike in fuel costs. Going ahead, NTPC’s growth will depend on the pace of capacity addition. We expect the company to register CAGR of 9.7% and 9.2% in its top line and bottom line over FY2011–13E. At the CMP of `184, the stock is trading at 2x FY2012E and 1.8x FY2013E P/BV. We maintain our Accumulate recommendation on the stock with a target price of `202