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NTPC: Taxes dent the bottomline
Oct 27, 2010

NTPC has declared its 2QFY11 results. The company has reported 34% YoY growth in sales while net profit has declined by 2% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow by 34% YoY during 2QFY11, 20% YoY during the first half 1HFY11.
  • Operating margins decline to 25.6% during the quarter, from 32.7% in 2QFY10. This is largely on account of higher provisions (as percentage of sales).
  • Led by weaker operating margins, lower other income, and higher tax charges, net profit declines by 2% YoY during the quarter and 9% YoY during the first half.


Financial performance snapshot
(Rs m)  2QFY10   2QFY11  Change  1HFY10   1HFY11  Change
Sales   112,514    151,138 34.3%  237,792  284,165 19.5%
Expenditure     75,679   112,419 48.5%   163,947  211,997 29.3%
Operating profit (EBDITA) 36,836     38,719 5.1%     73,845     72,167 -2.3%
Operating profit margin (%) 32.7% 25.6%   31.1% 25.4%  
Other income       2,712        2,535 -6.5%        5,222       4,804 -8.0%
Depreciation       6,438        5,063 -21.4%      12,565     11,890 -5.4%
Interest       5,407        5,902 9.2%        9,854     11,260 14.3%
Profit before tax 27,703     30,290 9.3%     56,648     53,822 -5.0%
Tax       6,183        9,216 49.0%      13,192     14,329 8.6%
Profit after tax/(loss)     21,520     21,074 -2.1%     43,456 39,493 -9.1%
Net profit margin (%) 19.1% 13.9%   18.3% 13.9%  
No. of shares (m)       8,246.0 8,245.8  
Diluted earnings per share (Rs)*         10.1  
P/E ratio (x)*         19.7  
* On a trailing 12-months basis

What has driven performance in 2QFY11?
  • NTPC grew its sales by 34% YoY during 2QFY11. This was largely a result of 3.5% YoY increase in power generation and subsequently higher sales. 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 2QFY11, as against 92.4% in 2QFY10. The company also benefited from commissioning of two units of 490 MW each in Dadri (UP) and a 500 MW unit in Kahalgaon (Bihar).

  • NTPC’s operating margins declined to 25.6% during the quarter, largely on account of higher provisions (as percentage of sales). The company’s fuel costs more or less remained stable at around 57%.

  • Despite the strong growth in net sales, NTPC’s net profits registered a drop of 2% YoY. This was largely owing to the impact of weaker operating margins. Lower other income and higher taxes also spoiled the bottomline picture for the company.

What to expect?
At the current price of Rs 199, the stock is trading at a multiple of 2 times our estimated FY13 book value per share. We maintain our view on the stock from a 2-3 years perspective.

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