MOSL: NTPC (Buy)-On track for commercializing ~5GW; Under recoveries set to decline
(NTPC IN, Mkt Cap USD15.8b, CMP INR114, TP INR158, 39% Upside, Buy)
** Over the past few months, recovery in availability factors at NTPC’s plants along with commissioning and commercialization of new capacities has lent visibility to NTPCs improving core earnings outlook.
** We note that disruption at Coal India’s mines impacted coal availability at NTPC’s plants during 1HFY20. However, (a) improving production at Coal India’s mines (such as Dipika) post-monsoon, and (b) muted power demand have helped improve coal stocks and PAFs. We expect FC recoveries of INR2.5b in 2HFY20 – resulting in overall FC under recoveries (u/r) of INR2b for FY20 (1HFY20: INR4.5b).
** Furthermore, commissioning of Darlipalli (800MW) and Khargone (660MW) and commercialization of Tanda (660MW) and Lara (800MW) over the last three months, bodes well for regulated equity addition (these plants would increase the company’s regulated equity by 13%).
Commercialization schedule appears on track
** NTPC’s commercialization target of ~5GW appears on track. While FY19 disappointed in terms of commercialization (just 1.9GW v/s target of 5GW), NTPC has already commercialized 3.6GW YTD FY20 (see exhibit 1). Moreover, commissioning of Khargone (660MW in Oct’19) and Darlipalli (800MW in Dec’19) lends visibility to NTPC’s subsequent commercialization.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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