NTPC's Q4FY19 results (Outperformer) - Earnings set to improve under new regulations
Q4FY19 result highlights
- NTPC reported an excellent quarter with sharp improvement in operating metrics. PAF for the quarter was 92.4% (+580bps yoy; vs 9m PAF of 85%). However, it is more pertinent to note that the PAF for Unchahar improved from 0% in 9mFY19 to 78% in Q4FY19, PAF for Mauda improved from 71% in 9mFY19 to 100%, Kudgi improved from 73% in 9mFY19 to 93% in Q4FY19.
- Improvement in newly commissioned capacity’s utilisation has led to reduction in under recovery from Rs11bn in 9mFY19 to Rs8bn in FY19 (vs Rs15bn in FY18). Note that PAF in April 19 was also 95% (+754 bps)
- As a result, NTPC adj. EBITDA is Rs74bn (vs est of Rs68bn) and PAT is Rs 32bn (+32%yoy; vs est of Rs27bn) for Q4FY19. PAT has been adjusted for a number of one offs (including late payment surcharge of Rs7.9bn, Barh CoD dispute, Rs6bn of provision for inland waterways dispute and change in deferred tax accounting). FY19 profit came in at Rs108bn, a growth of 11.3% yoy
- NTPC commercialised 2.2GW in FY19 - 2GW in standalone entity and 250MW in JV. As a result, standalone regulated equity grew by 6% yoy to Rs540bn.
- CERC issued new regulations for FY20-FY24E in March 2019. Under the CERC new regulations, return on equity are likely to increase by 200bps led by allowance of 85Kcal for GCV of coal from unloading point to firing point and increase in O&M expenses.
Key positives: Guidance of 5 GW of commercialisation in FY20
Key negatives: Miss in commercialisation in FY19 (2GW vs 4-5GW exp); increase in receivables from Rs60bn to Rs76bn QoQ
Impact on financials: Maintain our FY20E/FY21E estimates
Valuations & view
New regulations are better than expectations of the market especially for NTPC with base RoE being maintained at 15.5%, relief on GCV and no reduction in equity base for older power plants. The improving coal supply which leads to leads to lower fixed cost under recovery will address concerns on NTPC’s earnings growth trajectory. Moreover, strong commissioning visibility and consequent 14% CAGR in regulated equity would commensurately enable 14% earnings CAGR over FY18-22E. NTPC is attractively valued at 9.4x FY20E earnings, 1.1x FY19E BV and 5% dividend yield. We maintain Outperformer on the stock with a target price of Rs162.
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.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.