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NTPC: Electrifying performance - Views on News from Equitymaster

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NTPC: Electrifying performance
Jul 27, 2009

Performance summary
  • Net sales grow by 26% YoY during 1QFY10.
  • Operating margins expand by 1.1% YoY during the quarter, largely on account of lower employee costs (as percentage of sales).
  • Net profits grow by 27% YoY during the quarter.


Financial performance snapshot
(Rs m) 1QFY09 1QFY10 Change
Sales 95,395 120,027 25.8%
Expenditure 71,177 88,268 24.0%
Operating profit (EBDITA) 24,218 31,759 31.1%
Operating profit margin (%) 25.4% 26.5%  
Other income 7,172 7,763 8.2%
Depreciation 5,524 6,128 10.9%
Interest 4,219 4,447 5.4%
Profit before tax 21,647 28,947 33.7%
Tax 4,381 7,009 60.0%
Profit after tax/(loss) 17,265 21,938 27.1%
Net profit margin (%) 18.1% 18.3%  
No. of shares (m) 8,246.0 8,246.0  
Diluted earnings per share (Rs)*   10.5  
P/E ratio (x)*   20.4  
* On a trailing 12-months basis

What has driven performance in 1QFY10?
  • NTPC grew its sales by 26% YoY during 1QFY10. This was largely a result of 8% YoY increase in power generation and subsequently higher sales (up 10% YoY). The higher generation was a result of increase in average PLF (plant load factor, or capacity utilisation) of NTPC’s coal based plants. The PLF increased to 92.9% in 1QFY09, as against 92.2% in 1QFY09. Further, there was a sharp rise in the PLF of the company’s gas-based plants, as the same increased to 79.9% in 1QFY10, from 67.2% in 1QFY09.

  • NTPC’s operating margins expand by 1.1% YoY during the quarter, largely on account of lower employee costs (as percentage of sales). The company’s fuel costs more or less remained stable at around 65%.

  • On the back of a strong sales growth and improved margins, NTPC managed to grow its bottomline by 27% YoY during the quarter. The growth would have been higher but for the increase in the effective tax rate that stood at 24% in 1QFY10, as against 20% in 1QFY09.

What to expect?
At the current price of Rs 209, the stock is trading at a multiple of 2.3 times our estimated FY12 book value per share. In a recent analyst meet, NTPC’s management reiterated its capex plans for the current year, which stands at Rs 245 bn for the consolidated entity (as compared to Rs 152 bn spend in FY09). However, it sounded caution on India’s overall plans of ramping up its generation capacity by around 78,000 MW during the current XIth Five Year Plan. The management was especially concerned about the coal production in the country that can lead to supply falling short of demand in the future, thereby impacting the capacity expansion plans as a whole. As for its own expansion, the company has already raised its capacity by 3,240 MW during the current plan period, and another 17,930 MW is under execution. Its targeted expansion for the current fiscal stands at 3,300 MW. Overall, given its valuations, we have a cautious view on the stock.

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