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NTPC: Capacity Addition a Key to Earnings Going Ahead - Views on News from Equitymaster
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  • Nov 23, 2016 - NTPC: Capacity Addition a Key to Earnings Going Ahead

NTPC: Capacity Addition a Key to Earnings Going Ahead
Nov 23, 2016

NTPC declared results for the quarter ended September 2016. The revenues grew by 8.1% during the quarter as compared to a year ago. While, the profits declined by 18.1% during the quarter. Here is our analysis of the results.

Performance Summary
  • NTPC's standalone revenues grew by 8.1% YoY during the quarter. However, the gross generation remained flat and grew at a snail's pace of 0.7% during the quarter. The gross generation remained flat on account of subdued demand for power from the State Electricity Board (SEBs) partially on account of a good monsoon.
  • On account of lower generation, the plant load factor (PLF) was impacted. Lower PLF in-turn led to lower cash inflows in the form of incentives. PLF's declined to 74.7% and only five of its thermal power plant's operated at PLFs above of 85% threshold, which lowered the incentive income for the quarter.
  • Other income fell by 32% YoY. The fall is on account of redemption of the One Time Settlement Scheme (OTSS) bonds. Further, lower interest rates too played their part.
  • The company's net profits declined by 18% YoY during the quarter. However, the adjusted profits grew by 8% YoY during the quarter despite generation being flat. The growth in adjusted profits is line with growth of regulated equity.
  • The company is going to incur a capital expenditure of Rs 300 billion during this fiscal year. Of this, a capex of Rs 133.6 billion was incurred till the first half of the current fiscal year. The company is confident of achieving the target by the end of this fiscal. The company intends to commercialize 3.7 GW of capacity for FY17. However, till the first half capacity worth only 250 MW has been commissioned. We believe, that it will be really difficult for the company to commission 3.7 GW of capacity till FY17. This in-turn can dampen the earnings projections of the company for this year.
  • Another overhanging factor on earnings is the GCV measurement of coal on an 'as received' basis from the earlier 'as fired' basis. The company from 1 October 2016 has started measuring the GCV of the coal on an 'as received' basis. How much impact this factor has on the earnings of the company will be visible in the third quarter results. This is an overhanging factor which can dampen the earnings of the company.

    Standalone financial performance
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net sales 179,400 193,979 8.1% 350,874 384,597 9.6%
    Expenditure 137,902 140,066 1.6% 273,962 278,938 1.8%
    Operating profit (EBDITA) 41,497 53,914 29.9% 76,913 105,659 37.4%
    EBDITA margin (%) 23.1% 27.8% 21.9% 27.5%
    Other income 2,782 1,906 -31.5% 5,191 3,485 -32.9%
    Depreciation 12,887 14,342 11.3% 24,750 28,293 14.3%
    Interest 8,265 8,898 7.7% 15,780 17,903 13.4%
    Profit before tax 23,127 32,580 40.9% 41,574 62,948 51.4%
    Tax -7,266 7,621 -204.9% -11,508 14,603 -226.9%
    Effective tax rate -31% 23% -28% 23%
    Profit after tax/(loss) 30,392 24,960 -17.9% 53,081 48,346 -8.9%
    Other comprehensive income/ (expense) -229 -265 15.8% -490 -251 -48.7%
    Total comprehensive income 30,164 24,695 -18.1% 52,591 48,095 -8.6%
    Net profit margin (%) 16.8% 12.7% 15.0% 12.5%
    No. of shares (m) 8,245.5
    Diluted earnings per share (Rs)* 11.8
    Price to earnings ratio (x) 12.9

    (*On a trailing 12-month basis)

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