NTPC Ltd NTPC IN; NTPC.BO

Transcription

1 Power India NTPC Ltd NTPC IN; NTPC.BO Institutional Equity Research October 31, Q/F14 result review BUY Resilient quarter; Maintain BUY Current price Rs 149 Target price Rs 188 Upside/(downside) % 26 Earning estimate Revised Market data Mkt capitalisation Rs bn Average daily vol ' week H/L Rs 169 / 121 Shares O/S mn Free float mn Promotor holding % 75.0 Foreign holding % 10.5 Face value Rs 10.0 Price performance (%) 1m 3m 6m 1yr Nifty (abs) Stock (abs) (4.3) (9.0) Relative to Index (8.7) 5.5 (10.5) (21.0) Performance (Rs) Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 NTPC Ltd Source: Bloomberg, SSL (%) (8) (15) Rel. to BSEPOWER NTPC s 2QF14 results were good. On 5% higher capacity (YoY) the company has generated 54.5 BU (3.4% YoY) power amidst consistent backing down for power by the Discoms (lost 10Bn units of power in 1HF14 so far). Despite, shortage of gas the gas based station put up a better PAF (84% PAF with 32% PLF) during the quarter. Average tariff (based on booked revenue) stood at Rs 3.18/Kwh (up 5.3% YoY). Tariff stood 8.2% higher than SSLe largely due to lower variable cost assumed by us. Fixed cost remains in line with 1.5% lower than SSLe. Higher than expected variable cost (higher by 14%) trued up the adjusted sales by 9.1% YoY to Rs 161 bn (12% higher than SSLe). Reported Sales remained flat YoY. Adjusted PAT stood at 23.9 bn, in line with SSLe Rs 23.3 bn. Fuel logistics is improving, Farakka and Kahalgaon to get better supply: The recently operational inland waterway will streamline the fuel supply to the troubled power plants at Farakka (~65% PLF in F13) and Kahalgaon (~70% PLF in F13). Also these two power plants will get adequate amount of imported coal for better plant efficiency. According to management part of the displaced coal from these plants can also be used in other plants of the company. Mining operation to start soon, expects 3 mn ton of coal production in F14: ~ 50% of the land of the Pakri Barwadih and Chatti Bariatu mines is currently under the possession of the company. This is sufficient for commence mining at these mines. The last mile railway links and mining clearance is pending for Pakri Barwadih. Management expects production of 3mt of coal from this mine in F14e. Plans to keep availability at 89% in F14e, 1.5 GW commissioning in F14e and 1.4 GW in F15e: The recent CERC regulation for gas based plants (defining RLNG as designated fuel) will help the company to show better PAF despite lower gas availability. Also with better coal availability for its coal based plants the company expects to put up a better availability during F14e. Attractive at 1.28xF15BV, Maintain BUY: We maintain our BUY rating on the stock with a revised target price of Rs188. At the CMP of Rs149, the stock is trading at a P/BV of 1.3x F14e and 1.2x F15e, respectively. Assigning 2.0x (RoE 24% & cost of equity 13%) to F14e regulated equity, our target price incorporates 1.8x on the existing CWIP and 1.5x on the balance F14e equity of NTPC. Alok Ramachandran alok.ramachandran@sbicapsec.com Rabindra Nath Nayak rabindra.nayak@sbicapsec.com Financial summary Y/E March (Rs mn) F 13 F 14e F 15e F 16e Sales 656, , , ,880 EBITDA margin (%) PAT 126, , , ,361 EPS (Rs) P/E (x) EV/EBITDA (x) Dividend yield (%) RoE (%) RoCE (%) Source: Company, SSLe SBICAP Research on Bloomberg SBICAP <GO>, Please refer to our disclaimer given at the last page.

2 Quarterly financials (Rs. mn) 2Q/F14 2Q/F13 YoY (%) 1Q/F13 QoQ (%) 2Q/F14e Var. (%) Units Sold in BU (6.6) Averge Tariff in Rs Adjusted Sales 161, , , , Net Sales 162, , , , Var Cost/Kwh in Rs (1.5) Fixed Cost/Kwh in Rs (1.5) Fuel Cost 101,393 99, ,977 (4.3) 85, % of Revenue Employee Cost 8,380 8,965 (6.5) 7, ,599 (12.7) % of Revenue Other Expenses 11,863 10, , , % of Revenue EBITDA 41,088 42,243 (2.7) 36, , EBITDA Margin (%) Other Income 7,871 10,482 (24.9) 8,880 (11.4) 8,400 (6.3) Depreciation 9,679 7, , , Interest 6,205 3, , ,250 (0.7) Extraordinary items ,841 - PBT 33,075 41,825 (20.9) 49,400 (33.0) 31, Tax 8,146 10,402 (21.7) 7, ,185 (0.5) PAT 24,929 31,424 (20.7) 41,828 (40.4) 23, PAT margin (%) (21.4) 26.2 (41.5) 16.2 (5.7) EO Income (89.7) (92.4) 0 Adjusted PBT 31, , Tax 7, (7.4) 8,185 (4.6) Adjusted PAT 23,900 21, , , Source: SSLe Average Valuation - Rs188, BUY Mode Price objective Rationale A. DCF based valuation 150 FCFE of 8 competitive periods with the cost of Equity at 11.8%, terminal growth rate of 2% beyond F 21e Comparative valuation Mode and multiple Maximum x Median x Minimum x Recommended x B. 2-year forward P/E based price C. 2-year forward P/BV based price D. 2-year forward EV/EBITDA based price Target Price 188 Source: SSLe October 31,

3 Financials Y/E Mar (Rs mn) F 13 F 14e F 15e F16e Y/E Mar (Rs mn) F 13 F 14e F 15e F16e Net Sales 656, , , ,880 PBT 165, , , ,334 % Growth Depreciation 33,968 39,063 44,065 50,370 Operating expenses 485, , , ,476 Interest 19,244 29,493 35,490 40,450 EBIDTA 170, , , ,404 Others (29,119) % growth Operating CF 189, , , ,153 Other Income & EO 31,016 32,929 32,732 32,750 Change in WC (5,971) 13,177 28,513 (47,401) Depreciation 33,968 39,063 44,065 50,370 Direct taxes paid (28,956) (36,105) (38,267) (47,717) EBIT 167, , , ,784 Others EBIT margin Net operating CF 154, , , ,036 Interest 19,244 29,493 35,490 40,450 PBT 148, , , ,334 Investing CF (140,169) (157,232) (262,059) (98,469) % Growth Other Investing Acti Tax provision 39,592 39,027 43,631 50,973 PAT 109, , , ,361 Free Cash Flow 14,783 39,484 (23,347) 94,566 EO after PAT (17,138) Reported PAT 126, , , ,361 Financing CF (7,587) (34,147) (8,534) (95,894) % growth 36.8 (11.2) Dividend (%) Net Change 7,196 5,337 (31,880) (1,327) EPS (Rs) Opening Cash 161, , , ,113 BVPS (Rs) Closing Cash 168, , , ,786 Balance Sheet (Standalone) Key Ratios (Standalone) Y/E Mar (Rs mn) F 13 F 14e F 15e F16e Y/E Mar F 13 F 14e F 15e F16e Equity Cap 82,455 82,455 82,455 82,455 OPM (%) Regulated Equity 310, , , ,363 ROCE(%) Net worth 803, , ,729 1,057,907 Interest coverage rati Total Debt 552, , , ,725 Debt/Equity(X) Net Deff Tax Liability 28,993 43,475 48,839 52,095 Debtors Days Total Liability 1,385,064 1,505,952 1,663,553 1,757,726 Inventory Days Net Block 1,000,475 1,117,283 1,341,443 1,394,167 Creditor Days Investments 91,376 86,065 79,899 75,275 Other Long Term Ass 107, , , ,335 Current Assets Valuation Ratios Inventory 40,572 42,823 48,848 53,668 P/E Debtors 53,655 59,472 68,198 76,463 Price/BV Cash & Bank 168, , , ,346 EV/EBITDA Loans & Advances 33,680 33,355 33,037 32,726 Yield (%) Other Current Assets 115, , , ,564 Market Cap/Sales CL & Provisions Current Liabilities 156, , , ,520 Du Pont Analysis Short Term Provisions 70,045 56,715 59,575 61,296 NPM (%) Net Current Assets 185, , , ,950 Asset turnover (x) Misc. Exp Leverage(x) Total Assets 1,385,064 1,505,952 1,663,553 1,757,726 ROE(%) Source: Company, SSLe October 31,

4 Recommendation History 220 BUY Stock Price HOLD SELL Target Price Date Stock Price TP Rec. 16-May ADD 2-Aug ADD 29-Oct ADD 21-Jan ADD 195 (Rs) 170 Rating based on Current Rating System (Feb'13) Date Stock Price TP Rec. 21-Mar BUY 10-May BUY 1-Aug BUY 31-Oct BUY Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 SBICAP Securities Limited Corporate Office: Mafatlal Chambers, A-Wing, 2nd Floor, N. M. Joshi Marg, Lower Parel, Mumbai Tel.: /01 Fax: KEY TO INVESTMENT RATINGS (w.e.f. February 2013) Guide to the expected return over the next 12 months. 1=BUY (expected to give absolute returns of 15 or more percentage points); 2=HOLD (expected to give absolute returns between -10 to 15 percentage points); 3=SELL (expected to give absolute returns less then - 10 percentage points) DISCLAIMER We, Rabindra Nath Nayak, M. Sc. (Math), CFA Lead Analyst and Alok Ramachandran, MMS (Finance) Jr. Analyst, authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. This report has been prepared based upon information available to the public and sources, believed to be reliable. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. SBICAP Securities Limited (SSL),a full service Stock Broking Company and a member of National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE). SSL is a wholly owned subsidiary of SBI Capital Markets Limited (SBICAP), which is engaged into the investment banking activities and is registered with the Securities and Exchange Board of India as a Category I Merchant Banker. SBICAP (Singapore) Limited, a fellow subsidiary of SSL, incorporated in Singapore is regulated by the Monetary Authority of Singapore as a holder of a capital markets services license and an exempt financial adviser in Singapore. SBICAP (Singapore) Limited s services are available only to accredited investors (other than individuals), and institutional investors in Singapore as defined in section 4A of the Securities and Futures Act (Cap. 289) of Singapore. SBICAP (Singapore) is a wholly owned subsidiary of SBICAP. SBICAP (UK) Limited, a fellow subsidiary of SSL, incorporated in United Kingdom is authorised and regulated by the Financial Services Authority. [SBICAP, SBICAP (Singapore) Limited, SBICAP (UK) Limited and SSL are collectively referred to as SBICAP Entities]. Recipients of this report should assume that SBICAP Entities (and/or its Affiliates) is seeking (or may seek or will seek) Investment Banking, advisory, project finance or other businesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this material/ report. SSL (and/or its Affiliates) and its officers, directors and employees, including the analysts and others involved in the preparation/issuance of this material and their dependant(s), may on the date of this report/from time to time, have long/short positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. SSL s sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to its clients that reflect opinion that are contrary to the opinions expressed herein, and its proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. SSL may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different from those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to potential conflicts of interest. Please ensure that you have read Risk Disclosure Document for Capital Market and Derivatives Segments as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. The projections and forecasts described in this report should be carefully evaluated as these 1. Are based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. 2. Can be expected that some of the estimates on which these were based, will not materialize or will vary significantly from actual results, and such variances may increase over time. 3. Are not prepared with a view towards compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these. 4. Should not be regarded, by mere inclusion in this report, as a representation or warranty by or on behalf of SSL the authors of this report, or any other person, that these or their underlying assumptions will be achieved. October 31,

5 This report is for information purposes only and SBICAP Entities accept no liabilities for any loss or damage of any kind arising out of the use of this report. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. SSL will not treat recipients as clients by virtue of their receiving this report. It should not be construed as an offer to sell or solicitation of an offer to buy, purchase or subscribe to any securities this report shall not form the basis of or be relied upon in connection with any contract or commitment, whatsoever. This report does not solicit any action based on the material contained herein. It does not constitute a personal recommendation and does not take into account the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all the investors. SSL does not provide tax advice to its clients and you should independently evaluate the suitability of this report and all investors are strongly advised to seek professional consultation regarding any potential investment. Nothing in this report is intended by SBICAP Entities to be construed as legal, accounting or tax advice. Certain transactions including those involving futures, options, and other derivatives as well as non-investment grade securities give rise to substantial risk and are not suitable for all investors. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. Investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk. The price, value and income of the investments referred to in this report may fluctuate and investors may realize losses on any investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in projections. SSL has reviewed the report and, the current or historical information included here is believed to be reliable, the accuracy and completeness of which is not guaranteed. SSL endeavors to update on a reasonable basis the information discussed in this document/material/ report, but regulatory compliance or other reasons may prevent it from doing so. This report/document has been prepared by SSL based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. The opinions expressed in this report are subject to change without notice and have no obligation to tell the clients when opinions or information in this report change. This report has not been approved and will not or may not be reviewed or approved by any statutory or regulatory authority in India, United Kingdom or Singapore or by any Stock Exchange in India, United Kingdom or Singapore. This report may not be all inclusive and may not contain all the information that the recipient may consider material. This report does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This report or any portion hereof may not be printed, sold or distributed without the written consent of SBICAP Entities. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. Distributing /taking/sending/dispatching/transmitting this document in certain foreign jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Failure to comply with this restriction may constitute a violation of any foreign jurisdiction laws. Neither SBICAP Entities nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Further, no representation or warranty, expressed or implied, is made or given by or on behalf of SBICAP Entities, nor any person who controls it or any director, officer, employee, advisor or agent of it, or affiliate of any such person or such persons as to the accuracy, authenticity, completeness or fairness of the information or opinions contained in this report and SBICAP Entities or such persons do not accept any responsibility or liability for any such information or opinions and therefore, any liability or responsibility is expressly disclaimed. Legal Entity Disclosure Singapore: This report may be distributed in Singapore by SBICAP (Singapore) Limited (Registration No R), a holder of a capital markets services license and an exempt financial adviser in Singapore and solely to persons who qualify as institutional investors or accredited investors (other than individuals) as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ) and is not intended to be distributed directly or indirectly to any other class of person. Persons in Singapore should contact SBICAP (Singapore) Limited in respect of any matters arising from, or in connection with this report. United Kingdom: This marketing communication is being solely issued to and directed at persons (i) fall within one of the categories of Investment Professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Financial Promotion Order ), (ii) fall within any of the categories of persons described in Article 49 of the Financial Promotion Order ( High net worth companies, unincorporated associations etc. ) or (iii) any other person to whom it may otherwise lawfully be made available (together Relevant Persons ) by SSL. The materials are exempt from the general restriction on the communication of invitations or inducements to enter into investment activity on the basis that they are only being made to Relevant Persons and have therefore not been approved by an authorised person as would otherwise be required by section 21 of the Financial Services and Markets Act 2000 ( FSMA ). This report is issued and distributed by SBICAP Entities without any liability / undertaking / commitment on the part of itselves or SBI Capital Markets Limited or State Bank of India or any other entity in the State Bank Group. Further, in case of any commitment on behalf of State Bank of India or SBI Capital Markets Limited or any entity in the State Bank Group, such commitment is valid only when separately confirmed by that entity. October 31,