MOSL: NTPC (Buy)-Under-recoveries reduce sequentially; Capitalization to drive strong earnings growth
NTPC: Under-recoveries reduce sequentially; Capitalization to drive strong earnings growth; Maintain Buy
(NTPC IN, Mkt Cap USD18.6b, CMP INR155, TP INR194, 25% Upside, Buy)
NTPC's standalone (S/A) 1QFY19 adj. PAT increased ~16% YoY to INR29.5b. PAT is adj. for INR4.9b under-recovery (u/r) of fixed charge (FC), ~INR1.1b in tax reversal for prior period and other minor adjustments. Reported PAT was down ~1% YoY to INR25.9b (est. INR25.3b) to FC under-recovery and a stronger base in other income. Other income was down 79% YoY to INR1.4b as the prior year quarter included non-recurring income tax refund income of ~INR3.7b.
- There was no commercial capacity addition in the quarter. Hence, we estimate regulated equity to be broadly similar QoQ at ~INR509b. Commercial capacity at end of June 2018 stood at 51.4GW in group and 44.5GW in S/A.
- PLF based incentive increased ~1.3x YoY to INR1.3b as generation increased 7.5% YoY to 69.2BU. Higher generation is likely to have contributed to stronger adj. PAT growth, through operating efficiency savings.
- FC u/r of INR4.9b includes INR1.3b due to coal shortage, which has reduced sequentially from ~INR2.5b on improvement in domestic coal availability. The remaining u/r was on account of continuing u/r at Unchahar and Badapur, and due to higher maintenance shutdown (which will be recovered subsequently).
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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