Re-iterating BUY. Destimoney Research

Transcription

1 NTPC Limited (NTPC) Re-iterating BUY Destimoney Research 18 July 2013

2 NTPC Limited BUY TARGET : `170 CMP : `146 Key Data Bloomberg Code NTPC IN NSE Code NTPC BSE Code Sector Power Industry Electric Utilities Face value (` per share) 10 Book value (` per share) 97.5 Dividend yield 2.7% 52 Wk.(H/L)(`) / Market Cap. (` mn) 1,206,311 Shareholding pattern Jun-13 Mar Feb-13 Sep-12 Promoters 75.0% 75.0% 75.0% 84.5% FII 10.2% 9.4% 9.0% 4.0% DII 9.9% 10.5% 10.9% 7.7% Others 4.9% 5.2% 5.2% 3.8% Total 100.0% 100.0% 100.0% 100.0% Source: Company, Destimoney Research (`Mn Standalone) FY12 FY13 FY14E FY15E Net Revenue 620, , , ,084 EBITDA 137, , , ,254 EBITDA Margin 22.1% 26.1% 24.6% 25.2% EPS (`) Adj EPS (`) EV/EBITDA P/E (x) Price Performance CY10 CY11 CY12 YTD Absolute -14.9% -19.8% -2.7% -6.4% Relative -32.8% 4.8% -30.4% -8.6% Relative stock performance (Jul 12=100) Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 NTPC Nifty 2

3 NTPC looks set to leverage its position in the near future NTPC s revenue witnessed an improvement in Q4FY13, on the back of strong capacity addition during the quarter, while net profit surged ~69% QoQ to `43.8 billion, on account of interest income towards settlement of dues of Delhi Electric Supply Undertaking (DESU). Meanwhile, net sales for FY13 grew 5.8% YoY, while EBITDA rose 24.6%, as fuel cost per unit eased during the year. Net Profit advanced 36.8% YoY to `126.2 billion. During Q4FY13, the company added a capacity of 1,510 MW, while it commissioned 4,170 MW of capacity in FY13, in-line with the management s guidance and compared to 2,820 MW capacity added in FY12. However, NTPC s PAF and PLF were impacted due to difficulty in imported coal procurement. The company s PLF for coal based stations stood at 87% for Q4FY13 compared to 91% for Q4FY12. In a noteworthy development, the Government of India disinvested a 9.5% stake in the company at an indicative price of `145.9 by the way of Offer for Sale, which was subscribed around 1.7 times, leading to a total shareholding of 75.0%. NTPC has lined up significant capacity additions in the 12th five-year plan to drive future growth, with a capex of `202 billion in FY14 towards enhancing its generation capacity. Additionally, concerns surrounding coal supply are likely to ease going forward, as the company is in the process of developing six captive coal blocks. Moreover, the recent Fuel Supply Agreements with Coal India would pave the way for the company to improve fuel security for its plants. In addition, usage of inland waterways to transport imported coal would help the company to reduce its dependence on the domestic railway system. Going forward, higher commercialization coupled with better operating rates would be the key drivers of earnings growth. Moreover, regulated return model, cash rich balance sheet and continued power deficit scenario in the country bodes well for NTPC s future. NTPC is currently trading at 11.4 times its FY14 and 10.5 times of FY15 earnings. We re-iterate our BUY rating on NTPC Ltd. with a revised target price of `170 per share. 3

4 Significant increase in PAT due to settlement of dues with the DESU Source: Company Particulars (`Bn) Q4FY13 Q3FY13 Q4FY12 QoQ YoY Net Sales (Net of electricity duty) % 1.2% Other operating income NM NM Total income from operations % 6.0% Fuel cost % -0.5% Employee benefit expenses % 8.1% Other expenses % 45.9% Total expenses % 3.2% EBITDA % 14.2% Depreciation and amortization expenses % 38.7% EBIT % 8.9% Other income % 29.8% Finance costs % 21.4% Exceptional items Profit before tax % 57.2% Tax expense % 28.6% Net Profit after tax % 68.9% The company has reported a 4.4% QoQ rise in its Q4FY13 revenues due to higher realization. During the quarter, other expenses have climbed significantly on an annual basis, owing to an increase in water charges by the state government. The company has reported ~69% QoQ growth in its Q4FY13 PAT, on account of settlement of dues with DESU of which `8.36 billion is principal. The interest of `16.84 billion formed a part of exceptional items. 4

5 Highest ever capacity additions during the year Installed Capacity Plants commissioned in Q4FY ,364 Name of Project Capacity (MW) ,364 4,364 Rihand III 500 MW ,830 32,650 35,820 Vindhyachal Mauda Unit FY09 FY10 FY11 FY12 FY13 Standalone JVs Solar PV ( Andaman & Nicobar islands and Dadri) 10 Total 1,510 Source: Company The company added highest capacity in FY13 and simultaneously has achieved 30% of its Twelfth five year plan target. The company has commissioned a total of 4,170 MW projects in FY13 compared to 2,820 MW commissioned last year. 5

6 However, pressure seen on PLF and PAF in Q4FY13 PLF PAF 102% 84% 66% 92% 83% 87% 87% 78% 70% 72% 74% 63% 61% 91% 84% 86% 71% 67% 64% 75% 58% 59% 84% 87% 101% 95% 90% 92% 96% 94% 96% 94% 90% 90% 92% 94% 99% 95% 93% 90% 88% 96% 94% 93% 89% 48% 43% 84% 86% 83% 85% 80% 30% 78% Q2FY11 Q4FY11 Q2FY12 Q4FY12 Q2FY13 Q4FY13 Q2FY11 Q4FY11 Q2FY12 Q4FY12 Q2FY13 Q4FY13 Coal Gas Coal Gas Source: Company On an annual basis, the company has seen deterioration in its PLF and PAF for coal based stations in Q4FY13, which the management has attributed to the difficulty in procuring imported coal. Moreover, higher prices of gas led to a substantial decline in PLF of gas-based stations during the quarter under review. The company enjoyed a high load factor of 83% in FY13 compared to the all India PLF of ~70.0%. 6

7 on account of imported coal procurement issues 46 Fuel Supply MMT Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Domestic coal receipts Imported coal receipts Source: Company On account of the technical and commercial issues, imports in FY13 stood at ~9 MMT compared to 12 MMT in FY12 and the target of 17 MMT in FY13. However, the company received 105% of Annual Contracted Quantities (ACQ) (for pre-2009 capacity, ~124.9 MMT) in FY13 as compared to 98% of ACQ reported in FY12, thereby limiting further downside risks to the operating metrics. 7

8 leading to tepid generation Trend in generation 61 FY FY FY BU Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Source: CEA, Company Gross generation for Q4FY13 was almost flat on a sequential as well as annual basis, as the receipt of imported coal declined 10.2% annually. The gross generation for FY13 climbed 4.5% YoY to billion units. Additionally, the generation loss due to fuel supply in FY13 stood at billion units, significantly higher as compared to 7.88 billion units loss in FY12. In Q4FY13, 3.11 billion units of generation loss can be associated to shortfall in coal supply during the period. 8

9 However, NTPC has posted stellar FY13 performance Sales & Margins Revenue and Cost per unit ` Bn % 24% 19% ` % % 0.5 FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 Sales EBITDA Margin PAT Margin Fuel cost/unit Revenue/unit Source: Company 95% 90% 85% 80% 75% PLF and PAF s for coal-based stations 92% 91% 92% 88% 85% 88% 83% FY10 FY11 FY12 FY13 PLF PAF Source: Company 88% Source: Company, Destimoney Research For FY13, net sales climbed 5.2% YoY to `643.2 billion. Additionally, EBITDA registered a 24.6% YoY increase to `171.1 billion, as its fuel cost per unit eased during the year. The PLF for coal-based stations was 83% in FY13 compared to 85% reported in FY12 while the PLF for gas-based station was 56% as against 65% reported in the previous year. 9

10 With plans to add 9,888 MW in near term Capacities to be commissioned in FY14 Capacity Capacities to be commissioned in FY16 Capacity Rihand III 500 Kanti Subsidiary 195 Barh Vallur JV 500 Solar 20 Barh I 1320 Vindhyachal JV 500 Kudgi 800 Nabinagar JV 500 Total 3120 Total 1875 Capacities to be commissioned in FY15 Capacity Capacities to be commissioned in FY17 Capacity Bongaigaon 750 Kudgi 800 Barh II 660 Barh I 660 Tapovan Vishnugarh Hydel 520 Nabinagar JV 500 Kanti Subsidairy 195 Koldam 800 Singrauli Hydel 8 Total 4093 Source: Company Reports The company is planning a capital expenditure of `202 billion in FY14 in an attempt to augment its generation capacity. 10

11 by increasing its focus on captive coal mines Coal Requirements 100% (MT) 75% % 1.6% 4.3% 1.5% 9.5% 1.5% 1.4% 17.0% 21.4% 21.7% 15.1% 9.6% 50% 25% 75.4% 72.7% 73.7% 72.0% 0% FY14E FY15E FY16E FY17E ACQ+LoA Domestic Deficit Captive e-auction + MoU Equivalent Imports (MT) Source: Company The company has planned to increase its dependence on its captive mines with commencement of production at coal blocks starting in FY14. Out of the 24 MT coal import target for FY14, NTPC has already placed a 7 MT bid. The company expects to reach a capacity of ~40 MT of coal from 5 of the 6 mines by 2017, implying that 25% of its coal capacity would be met by its own mines. Usage of inland waterways to transport imported coal would help the company to reduce its dependence on domestic railway system. The inland water transport system at Farakka commences in Q1FY14. 11

12 Valuation and recommendation We believe that receding concerns over its coal supply issues and proven execution capabilities should help the company in sustaining growth momentum going forward. Additionally, the company looks well placed to take advantage of the opportunities offered by the Indian power sector. NTPC is currently trading at 11.4 times its FY14 and 10.5 times of FY15 earnings. We re-iterate our BUY rating on NTPC Ltd. with a revised target price of `170 per share. Relative stock performance (Jul 12=100) Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 NTPC Nifty Parameters FY12 FY13 FY14E FY15E EPS (` per share) P/E (x) P/B ROE 12.6% 15.7% 12.2% 12.1% ROCE 12.0% 10.8% 9.8% 9.6% EV/EBIDTA Source: Company, Destimoney Research, Bloomberg 12

13 Standalone Financials Income Statement ` Mn FY12 FY13 FY14E FY15E Total Income 620, , , ,084 Total Expenditure 483, , , ,830 EBIDTA 137, , , ,254 Depreciation 27,917 33,968 38,342 41,172 EBIT 109, , , ,082 Other Income & Excp. Items 27,784 47,857 28,942 30,308 Interest & Fin. Charges 17,116 19,244 25,301 25,301 Prior Year Adjust. (Net) -3, PBT 123, , , ,089 Tax 31,024 39,592 33,260 36,083 PAT 92, , , ,007 Adj. PAT 82,552 91, , ,007 EPS Adj. EPS Parameters FY12 FY13 FY14E FY15E EBIDTA Margin (%) 22.1% 26.1% 24.6% 25.2% Net Margin (%) 14.9% 19.2% 15.0% 15.5% ROCE 12.0% 10.8% 9.8% 9.6% ROE 12.6% 15.7% 12.2% 12.1% Balance Sheet ` Mn FY12 FY13 FY14E FY15E Liabilities Share Capital 82,455 82,455 82,455 82,455 Reserves & Surplus 650, , , ,916 Shareholders Equity 732, , , ,371 Deferred items 14,301 12,441 12,441 12,441 Total Non-current liabilities 488, , , ,749 Current liabilities 172, , , ,290 Total Liabilities 1,408,307 1,611,165 1,798,508 1,886,850 Assets Fixed assets 870,842 1,000,455 1,027,013 1,134,506 Other Non-current assets 163, , , ,039 Current investments 16,225 16,225 17,716 18,552 Other current assets 357, , , ,753 Total Assets 1,408,307 1,611,165 1,798,508 1,886,850 Source: Company, Destimoney Research 13

14 Key Risks Hindrances / logjam in securing fuel supply may stall capex in new power facilities. Lack of demand due to poor purchasing power of state distribution utilities or sharp rise in fuel cost (which is a pass-through for NTPC) may result in capacities sitting idle for NTPC. Delays in commissioning as seem in the past could hamper our earnings estimate. 14

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