NTPC's Q4FY18 results (Outperformer) - Miss led by under recoveries
Q4FY18 result highlights
- NTPC adj. EBITDA is Rs57bn (vs est of Rs57.4bn) and PAT iss Rs 21.5bn (-17%yoy; vs est of Rs26bn) for Q4FY18. PAT has been adjusted for prior period income and expenses. FY18 profit was Rs97bn, flat yoy. FY18 profit has been adversely impacted by under recovery of Rs14.3bn on account of lower availability in recently commissioned power plants especially in Mauda, Solarpur, Simhadri and Kudgi & shutdown of Unchahar power plant
- NTPC’s coal-based TPS recorded an average PLF of 79.0%/ (-218bps/flat yoy) in Q4FY18/FY18. PAF for Q4FY18/FY18 for coal based TPS was 86.6%/86% (-834bps/-560 bps yoy). Note that 4.2GW of coal based capacity PAF was lower than 80%. We expect availability of stations to improve in FY19E leading to lower under recovery in FY19E.
- NTPC commercialised 4.4GW in FY18 - 4GW in standalone entity and 445MW in JV. The total capacity commercialised in FY18 is highest in its history. As a result, standalone regulated equity grew by 14% yoy to Rs509bn.
- NTPC is expected to commercialise 5GW each in FY19E & FY20E respectively and another ~8GW of capacity is under advanced stages of commissioning/commercialisation. As a result, we estimate regulated equity to grow at 15% CAGR on standalone basis over FY18-FY22E. In addition, JV capacity will grow from 6.7GW to 11GW over FY18-22E
Key positives: 4.4 GW of commercialisation;
Key negatives: Rs14.3bn of under recovery in power plants
Impact on financials: We reduce our FY19 estimates by 3% to account for delay in start of Unchhahar power plant.
Valuations & view
Improving PAF of NTPC’s greenfield power plants and resolution on GCV will address concerns on the company’s earnings growth. Moreover, strong commissioning visibility and consequent 15% CAGR in regulated equity would commensurately enable 14% earnings CAGR over FY18-22E. NTPC is attractively valued at 12x FY19E earnings, 1.3x FY19E BV and 3% dividend yield. We maintain Outperformer on the stock with a target price of Rs200. Adverse regulation by CERC for tariff period FY20E-24E (especially reduction of RoE due to lower interest rates) could pose a key risk for the stock.
NTPC owns and operates power generation plants that supply power to state electricity boards throughout India. Co. also offers consultancy services related to infrastructure sector business such as: Fossil fuel based thermal power plants; Combined cycle power plants; Cogeneration plants; Water supply and treatment and Environment engineering and management. Co. runs a Power Management Institute (PMI), at NOIDA. PMI has over the years trained a number of professionals from Co., State Electricity Boards and other power utilities in the country. Also, participants in PMI programmes have come from various South Asian and Middle Eastern countries.
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