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MOSL: NTPC (Buy)-Profits rise with recoveries of fixed costs

NTPC: Profits rise with recoveries of fixed costs

(NTPC IN, Mkt Cap USD16b, CMP INR116, TP INR154, 33% Upside, Buy)

 

Fixed-charge recoveries flow in as availability improves

• NTPC’s results highlight the benefit of fixed-cost (F/C) recoveries and higher surcharge income. Reported PAT was up 26% YoY. We expect recoveries to continue in 4Q with improving availability at NTPC’s plants.
• Commercialization is on track with 4.2GW YTD (target: 5GW). Pick-up in capitalization, along with lower F/C u/r, is expected to drive earnings CAGR of 14% over FY19-22. Maintain Buy with a target price of INR154. 

Profits increase on fixed-cost recoveries and higher surcharge income

• Adjusted for one-offs, NTPC's S/A PAT increased 27% YoY to INR29.6b, led by fixed-cost recoveries of ~INR0.7b v/s under-recoveries of INR2.8b in the previous year. Furthermore, other income jumped to INR5.3b (v/s INR1.9b) on account of income from late payment surcharge.
• Not accounting for FC u/r, profits stand higher by 14% YoY at INR29b, marginally below (6%) our estimate of INR30.9b due to lower PLF incentives and the impact of tax leak on DTA readjustment, in our view.
• FC recoveries of INR0.7b were largely driven by better availability at NTPC’s plants, given production recovery at corresponding Coal India’s mines. On the other hand, the company had witnessed FC u/r of INR2.8b in the same quarter last year pertaining to Unchahar (which has now stabilized post the boiler blast) and the lack of coal availability at Kudgi and Mauda (non-pithead plants).
• NTPC booked late payment surcharge of INR4.2b (v/s INR0.9b in 3QFY19), given the change to accrual accounting and higher overdues amount.