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NTPC: Higher tariff props up sales
May 26, 2009

Performance summary
  • Net sales grow by 13% YoY during FY09, 7% YoY during 4QFY09.
  • Operating margins contract during both the periods under consideration, largely on account of higher fuel costs (as percentage of sales).
  • Net profits grow 11% YoY during the fiscal, duly helped by a lower tax outgo on account of a deferred tax credit.
  • Announces final dividend of 80 paisa per share. This along with the interim dividend of Rs 2.8 per share takes total dividend for the year to Rs 3.6 per share (dividend yield of 1.7%).


Financial performance snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Sales 107,436 114,458 6.5% 370,501 419,237 13.2%
Expenditure 79,215 92,259 16.5% 258,262 315,259 22.1%
Operating profit (EBDITA) 28,221 22,199 -21.3% 112,239 103,978 -7.4%
Operating profit margin (%) 26.3% 19.4%   30.3% 24.8%  
Other income 7,439 10,357 39.2% 29,676 33,490 12.9%
Depreciation 6,071 7,264 19.7% 21,385 23,645 10.6%
Interest 8,074 5,671 -29.8% 17,980 20,229 12.5%
Profit before tax 21,516 19,621 -8.8% 102,549 93,595 -8.7%
Tax 8,121 (1,512) -118.6% 28,401 11,582 -59.2%
Profit after tax/(loss) 13,395 21,134 57.8% 74,148 82,013 10.6%
Net profit margin (%) 12.5% 18.5%   20.0% 19.6%  
No. of shares (m)       8,246.0 8,246.0  
Diluted earnings per share (Rs)*         9.9  
P/E ratio (x)*         20.3  
* On a trailing 12-months basis

What has driven performance in FY09?
  • NTPC grew its sales by 13% YoY during FY09. This was largely a result of 14% YoY increase in average tariff per unit, from Rs 1.8 in FY08 to Rs 2.1 in FY09. The company sold around 194 bn units (BU) of electricity during the year, which was up by 3% YoY. This was on the back of a 2.9% YoY rise in generation.

  • NTPC’s power generation would have been higher during the fiscal but for a decline in the PLF (plant load factor, or capacity utilisation) of its coal based plants. The PLF came down by around 1% YoY (to 91.1%) during the fiscal on account of planned maintenance of these plants and coal constraints. The PLF of gas based stations also came down by 1%, to 67%.

  • NTPC commissioned 1,000 MW (mega-watts) of new generation capacity during FY09, thereby taking its total capacity to 30,144 MW. Its power generation formed over 28% of the total electricity generated in India during the fiscal despite the fact that the company owns less than 19% of the total installed capacity of the nation, and thus speaks volumes about NTPC’s better efficiency and capacity utilisation.

  • NTPC incurred capex of around Rs 127 bn during FY09 (on a standalone basis), which was higher by 45% YoY. For the current fiscal (FY10), the company is targeting a capex of Rs 177 bn for which it has already tied up the necessary financing. In terms of capacity, the company has outlined a plan to add 3,300 MW of generation capacity during FY10 and has maintained that it will be able to meet its target of setting up a total of around 22,000 MW during the XIth five year plan (2007-12). However, given the pace of expansion combined with project delays, we are of the belief that NTPC might trip a little in terms of its planned expansion.

    New capacity addition
    Details Capacity (MW)
    FY10
    Sipat Stage-I 1,320
    Kahalgaon Stage-II 500
    Korba Stage-III 500
    NCTPP Stage-II 980
    Total addition planned for FY10 3,300
    XIth Plan (2007-2012)
    Capacity commissioned 2,740
    Capacity under implementation 17,930
    Capacity under bidding 1,760
    Total addition planned for XIth Plan 22,430
    Source: Company press release

What to expect?
At the current price of Rs 202, the stock is trading at a multiple of 2.6 times our estimated FY11 book value. While NTPC’s sales for FY09 have come in lower by 1% as against our estimates, its profits are higher by 10% as compared to our estimates. We maintain our view on the stock> from a 2 to 3 years perspective. Overall, we continue to derive confidence in the company’s ability to execute large-scale projects and generate adequate cash flows to fund its part of the expansion.

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