NTPC's Q3FY18 results (Outperformer) - Result below estimates; marred by lower availability
Q3FY18 result highlights
- NTPC adj. EBITDA is Rs56bn (vs est of Rs59bn) and PAT was Rs 22bn (-12.3%yoy; vs est of Rs26bn) for 3QFY18. PAT has been adjusted for prior period income and expenses. The miss in the profit has been led by under recovery of Rs5.5bn on account of lower availability in recently commissioned power plants especially in Unchahar, Mauda, Solarpur and Kudgi.
- NTPC commercialised 1100MW in Q3FY18. During 9mFY18, NTPC has commercialised 4.4GW – 4GW in standalone entity and 445MW in JV. As a result, standalone regulated equity grew by 18% yoy to Rs506bn. The total capacity to be commercialised in FY18E is 4.5GW, highest in its history
- NTPC is expected to commission 2.7GW and 4.7GW in FY18 & FY19 respectively and another ~10GW of capacity is under advanced stages of commissioning. We expect commercialization of >4GW/annum over FY18E-FY20E. We estimate regulated equity to grow at 18% CAGR on standalone basis over FY18E-FY22E. In addition, JV capacity will grow from 6.7GW to 11GW over FY17-22E
- NTPC’s coal-based TPS recorded an average PLF of 76.9% (-29bps yoy) in Q3FY18. Note that 4.2GW of coal based capacity PAF was lower than 80%. We expect availability of stations to improve in Q4FY18 leading to lower under recovery in FY18
Key positives: 4.4 GW of commercialisation; Commencement of hearing on GCV resolution on positive recommendation of CEA
Key negatives: Rs5.5bn of under recovery in power plants
Impact on financials: We reduce our FY18 estimates by 3% to account for miss in earnings for Q3FY18.
Valuations & view
NTPC earnings is expected to grow by 17% CAGR over FY18-22E led by strong commissioning visibility and 18% CAGR in regulated equity over FY18-FY22E,. NTPC looks attractive at 12x FY19E earnings, 1.3x FY19E BV and at 3% dividend yield. We maintain Outperformer on the stock, with a target price of Rs200. However, any adverse regulations from CERC for tariff period FY20E-24E (especially reduction of ROE due to lower interest rates) remains a key risk for NTPCFY18-22E.(especially reduction of ROE due to lower interest rates).
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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