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NTPC: Margins expand, profits surge

Jan 22, 2013

NTPC declared results for the third quarter and nine month period ended December 2012. The company reported a 2% YoY growth in net sales and 22% YoY rise in profits during the quarter. Here is our analysis of the results.

Performance summary
  • Net sales increase by 1.7% YoY during the quarter, while volumes are up by 6.9% YoY.
  • Operating margins expand by 5.8% YoY to 25.5% on the back of lower fuel (coal) costs (as percentage of sales).
  • Profits rise by about 22% YoY during 3QFY13.
  • During 9mFY13, company's revenues and profits rise by about 6% YoY and 24% YoY respectively.
  • At the end of December 2012, NTPC's standalone installed capacity stood at 33,872 MW, as compared to 31,052 MW at the end of FY12.

Standalone financial performance
(Rs m) 3QFY12 3QFY13 Change 9mFY12 9mFY13 Change
Net sales 155,424 158,076 1.7% 456,907 483,248 5.8%
Expenditure 124,765 117,797 -5.6% 358,503 360,045 0.4%
Operating profit (EBDITA) 30,659 40,279 31.4% 98,404 123,204 25.2%
EBDITA margin (%) 19.7% 25.5%   21.5% 25.5%  
Other income 7,021 7,220 2.8% 21,085 22,175 5.2%
Depreciation 7,560 8,288 9.6% 20,554 23,755 15.6%
Interest 4,491 5,304 18.1% 12,246 13,332 8.9%
Profit before tax 25,628 33,907 32.3% 86,688 108,292 24.9%
Tax 4,324 7,940 83.6% 20,385 25,914 27.1%
Effective tax rate 17% 23%   24% 24%  
Profit after tax/(loss) 21,304 25,968 21.9% 66,303 82,378 24.2%
Net profit margin (%) 13.7% 16.4%   14.5% 17.0%  
No. of shares (m)         8,245.5  
Diluted earnings per share (Rs)*         13.1  
Price to earnings ratio (x)         12.5  
(*On a trailing 12-month basis)

What has driven performance in 9mFY13?
  • NTPC's generation capacity at the end of December 2012 stood at 33,872 MW. This is higher by 2,820 MW as compared to the period ended March 2012. It must however be noted that this includes a change of 62 MW on account of a change in capacity. The volumes sold were higher by 5.93% YoY as compared to the nine-month period ended 2011. Revenues during this period were higher by 5.8% YoY, indicating that the average tariff rates were lower as compared to last year. As per the company, the average tariffs during 9mFY13 stood at Rs 2.98 per unit.

  • NTPC's Plant Availability Factor (PAF) remained flat while its Plant Load Factor (PLF, average capacity utilization) was lower during the period by 2.3% (of total capacity). As such one may infer that the new capacity contributed significantly to the higher volumes. The volume of electricity generated stood at 170.8 bn units during 9mFY13 as compared to 161 bn units during the corresponding period last year. Total generation in FY12 stood at 222 bn units.

  • NTPC's operating margins expanded by 4% YoY during 9mFY13 largely aided by lower fuel costs. Its profits increased by 24% YoY during 9mFY13, supported by a strong operating performance.

What to expect?
At the current price of Rs 164, the stock is trading at a multiple of about 1.5 times our estimated FY15 book value per share. We have provided our updated view in our write up on the company's offer for sale lelinks which was open on February 07, 2013.

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