2QFY2016 Result Update | Power
November 20, 2015
NTPC
BUY
CMP
`133
Performance Highlights
Target Price
`157
Investment Period
12 Months
Standalone (` cr)
2QFY16
2QFY15
yoy%
1QFY16
qoq%
Net revenue
17,899
16,737
6.9
17,085
4.8
Stock Info
EBITDA
4,031
3,242
24.3
3,438
17.2
Sector
Power
Margin (%)
22.5
19.4
315bp
20.1
240bp
Market Cap (` cr)
1,09,788
Reported PAT
2,898
2,072
39.9
2,135
35.7
Source: Company, Angel Research
Net Debt (` cr)
72,307
Beta
0.9
For 2QFY2016, NTPC’s net sales increased by 6.9% yoy to `17,723cr (2.4%
52 Week High / Low
165/107
below our estimate; and as against `16,582cr in the corresponding quarter of
Avg. Daily Volume
5,28,228
last year) led by a 6% yoy increase in coal PLF. Coal PLF improved 407bp to
Face Value (`)
10
77.3% as against 73.2% last year. Gas PLF however continued to fall, coming in
BSE Sensex
25,483
at 25.7% as against 33.4% last year. PAF remained stable at 88.1%/97.6% for
Nifty
7,732
coal and gas respectively.
Reuters Code
NTPC.BO
Higher than expected operating expenses resulted in the EBITDA coming in 5.5%
Bloomberg Code
NTPC IN
below our estimate, at `4,031cr. The EBITDA however increased 24% yoy
resulting in a 315bp improvement in margin. While depreciation and interest
Shareholding Pattern (%)
expenses were in line with expectations, higher tax refunds boosted net profit,
Promoters
75.0
which came in 9.6% ahead of our expectation at `2,898cr.
MF / Banks / Indian Fls
13.5
Strong capacity addition to drive regulated equity: NTPC’s current capacity stands
FII / NRIs / OCBs
9.2
at 45,048MW and the company plans to add ~23,500MW by FY2019. The
Indian Public / Others
2.3
company will commission 7,500MW by FY2017, ~8,050MW in FY2018 and
~8,200MW in FY2019. Led by the strong capex, the Management expects to see
a 45% jump in regulated equity by FY2018 and a 75% increase by FY2019.
Abs. (%)
3m 1yr
3yr
Outlook and valuation: We like NTPC for the growth offered by its regulated
Sensex
(8.4)
(9.5)
39.2
equity model, huge capacity addition plans and expected improvement in
NTPC
4.6
(9.2)
(19.9)
demand for power in the country. At the current market price of `133, the stock
trades at a P/BV of 1.27x and 1.19x its FY2016E and FY2017E BV/share of `105
3-year price chart
and `112), respectively. We remain positive on the stock with a target price of
180
`157, based on ~1.4x FY2017E BV, implying an 18% upside in the stock price
170
from the current levels. We retain our Buy rating on the stock.
160
150
Key financials (Consolidated)
140
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E
FY2017E
130
120
Revenue
69,377
78,951
80,622
87,064
98,846
110
% chg
5.3
13.8
2.1
8.0
13.5
100
Adj. net profit
12,591
11,404
9,986
9,650
10,884
% chg
16.2
0.0
(12.4)
(3.4)
12.8
Adj. EPS (`)
13.8
13.8
12.1
11.7
13.2
Source: Company, Angel Research
OPM (%)
26.2
25.0
21.7
23.4
23.5
P/E (x)
8.7
9.6
11.0
11.4
10.1
P/BV (x)
1.4
1.3
1.3
1.3
1.2
RoE (%)
16.2
13.6
11.8
11.4
12.1
RoCE (%)
10.0
9.3
6.9
7.9
8.5
Rahul Dholam
EV/Sales (x)
2.3
2.2
2.4
2.3
2.1
Tel: 022- 3935 7800 Ext: 6847
EV/EBIDTA
8.9
8.8
10.8
9.8
8.8
[email protected]
Source: Company, Angel Research; Note: CMP as of November 18, 2015
Please refer to important disclosures at the end of this report
1
NTPC | 2QFY2016 Result Update
Exhibit 1: 2QFY2016 performance (Standalone)
(` cr)
2QFY16
2QFY15
yoy%
4QFY15
qoq%
FY2015
FY2014
yoy%
Net Sales
17,723
16,582
6.9
17,019
4.1
72,638
71,603
1.4
Other Operating Income
176
154
13.8
66
166.5
608
416
46.1
Net sales
17,899
16,737
6.9
17,085
4.8
73,246
72,019
1.7
Fuel Cost
11,541
11,439
0.9
11,509
0.3
48,845
45,830
6.6
% of net sales
64.5
68.3
67.4
66.7
63.6
Employee Cost
922
918
0.4
923
(0.1)
3,670
3,825
(4.1)
% of net sales
5.1
5.5
5.4
5.0
5.3
Other expenditure
1,405
1,137
23.6
1,215
15.7
4,645
4,557
1.9
% of net sales
7.9
6.8
7.1
6.3
6.3
Total expenditure
13,868
13,494
2.8
13,647
1.6
57,160
54,211
5.4
% of net sales
77.5
80.6
79.9
78.0
75.3
EBITDA
4,031
3,242
24.3
3,438
17.2
16,086
17,808
(9.7)
Margin (%)
22.5
19.4
315bp
20.1
240bp
22.0
24.7
(221bp)
Interest
815
667
22.0
731
11.4
2,744
2,407
14.0
Depreciation
1,323
1,152
14.9
1,238
6.9
4,912
4,142
18.6
Other income
275
531
(48.1)
239
15.4
2,116
2,646
(20.0)
Exceptional items
-
-
-
-
-
Profit before tax
2,169
1,954
11.0
1,708
27.0
10,547
13,905
(24.2)
% of net sales
12.1
11.7
10.0
14.4
19.3
Tax
(730)
(118)
(428)
256
2,930
(91.3)
% of PBT
(33.6)
(6.0)
(25.1)
2.4
21.1
Net Profit
2,898
2,072
39.9
2,135
35.7
10,291
10,975
(6.2)
Source: Company, Angel Research
Exhibit 2: 2QFY2016 Actual vs. estimates
(` cr)
Actual
Estimates
Variation (%)
Net sales
17,899
18,342
(2.4)
EBITDA
4,031
4,266
(5.5)
EBITDA margin (%)
22.5
23.3
(74bp)
Net Profit
2,898
2,645
9.6
Source: Company, Angel Research
Result highlights
Revenue and EBITDA below our estimate
For 2QFY2016, NTPC’s net sales increased by 6.9% yoy to `17,723cr (2.4% below
our estimate; and as against `16,582cr in the corresponding quarter of last year)
led by a 6% yoy increase in coal PLF. Coal PLF improved 407bp to 77.3% as
against 73.2% last year. Gas PLF however continued to fall, coming in at 25.7% as
against 33.4% last year. PAF remained stable at 88.1%/97.6% for coal and gas
respectively.
November 20, 2015
2
NTPC | 2QFY2016 Result Update
Exhibit 3: PAF continues to remain stable
Exhibit 4: Coal PLF increases 407bp yoy
(%)
(%)
100.0
120.0
90.0
100.0
80.0
70.0
80.0
60.0
60.0
50.0
40.0
40.0
30.0
20.0
20.0
10.0
0.0
-
Coal based
Gas based
Coal based
Gas based
Source: Company, Angel Research
Source: Company, Angel Research
Higher than expected operating expenses resulted in the EBITDA coming in 5.5%
below our estimate at `4,031cr. The EBITDA however increased 24% yoy, resulting
in a 315bp improvement in margin. While depreciation and interest expenses were
in line with our expectations, higher tax refunds boosted net profit, which came in
9.6% ahead of our expectation at `2,898cr.
Exhibit 5: Quarterly Performance Trend
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
Realisation (`/unit sold)
2.9
3.2
3.4
3.6
3.1
3.2
3.3
3.3
3.1
3.2
Fuel cost (`/unit sold)
1.8
2
2.1
2.5
2.2
2.2
2.1
2.2
2.1
2.1
Source: Company, Angel Research
Exhibit 6: Revenue growth continues to pick up
Exhibit 7: EBITDA increases 24% yoy
25,000
30
5,000
24.9
32.0
27.6
4,500
26.2
24.8
20
27.0
20,000
4,000
22.7
21.8
3,500
19.5
19.6
20.2
20.2
10
22.0
15,000
3,000
0
2,500
17.0
10,000
2,000
(10)
12.0
1,500
5,000
1,000
(20)
7.0
500
0
(30)
-
2.0
EBITDA (` cr)
Margin (%)
Revenue (` cr)
yoy change (%)
Source: Company, Angel Research
Source: Company, Angel Research
November 20, 2015
3
NTPC | 2QFY2016 Result Update
Investment arguments
Strong capacity additions to drive regulated equity
NTPC is a long term growth play on the power sector with the company having
plans to increase its total capacity to 128GW by 2032. The company’s current
capacity stands at 45,048MW including 6,196MW through its joint ventures. The
company has a strong capacity addition plan over the next 4-5 years and is
expected to add
~23,500MW by FY2019. The company will commission
7,500MW by FY2017, ~8,050MW in FY2018 and ~8,200MW in FY2019. The
company has earmarked a consolidated capex of ~`29,500cr this fiscal. We
expect the strong capex plan to drive the regulated equity base going forward. The
Management has guided for a 45% jump in regulated equity by FY2018 and a
75% increase by FY2019.
Well placed to benefit from demand recovery
Power sector woes were mostly related to fuel supply issues and demand from
SEBs. We believe the constraints in availability of coal should ease going forward
in line with the step up in production growth rates at Coal India. The government
has shown strong focus in easing fuel supply issues. Cabinet approval for gas
pooling also raises expectations of improved availability of gas. We also expect
demand to improve going forward as the industrial cycle picks up. NTPC is well
placed to benefit from any such revival in power demand.
November 20, 2015
4
NTPC | 2QFY2016 Result Update
Outlook and valuation
We like NTPC for the growth offered by its regulated equity model, huge capacity
addition plans and expected improvement in demand for power in the country. At
the current market price of `133, the stock trades at a P/BV of 1.27x and 1.19x its
FY2016E and FY2017E BV/share of `105 and `112, respectively. We remain
positive on the stock with a target price of `157, based on ~1.4x FY2017E BV,
implying an 18% upside in the stock price from the current levels. We retain our
Buy rating on the stock.
Exhibit 8: Valuation
Price / BV
(` cr)
FY17E Net Worth
92,602
Multiple (x)
1.4
Equity Value
129,643
Target price (`)
157
Source: Company, Angel Research
Company background
NTPC is India’s largest power company with total installed capacity of 45,548 MW
(including JVs) with 18 coal based and 7 gas based stations. The company has set
a target to have an installed power generating capacity of 1,28,000 MW by the
year 2032. The capacity will have a diversified fuel mix comprising 56% coal,
16% Gas, 11% Nuclear and 17% Renewable Energy Sources including hydro. By
2032, non-fossil fuel based generation capacity shall make up nearly 28% of
NTPC’s portfolio. NTPC has been operating its plants at high efficiency levels.
Although the company has 17.73% of the total national capacity, it contributes
25.91% of total power generation due to its focus on high efficiency.
November 20, 2015
5
NTPC | 2QFY2016 Result Update
Profit & Loss Statement (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E
FY2017E
Net Sales
67,953
78,479
79,944
86,437
98,134
Other operating income
1,424
472
678
626
711
Total operating income
69,377
78,951
80,622
87,064
98,846
% chg
5.3
13.8
2.1
8.0
13.5
Total Expenditure
51,194
59,252
63,110
66,648
75,636
Fuel cost
42,828
47,790
51,461
54,007
61,284
Employee Costs
3,551
4,039
3,890
4,370
4,962
Other Expenses
4,815
7,423
7,759
8,271
9,390
EBITDA
18,182
19,699
17,512
20,416
23,209
% chg
17.8
8.3
(11.1)
16.6
13.7
(% of Net Sales)
26.2
25.0
21.7
23.4
23.5
Depreciation& Amortisation
3,823
4,770
5,565
6,075
6,925
EBIT
14,359
14,929
11,948
14,341
16,284
% chg
16.5
4.0
(20.0)
20.0
13.5
(% of Net Sales)
20.7
18.9
14.8
16.5
16.5
Interest & other Charges
2,481
3,203
3,570
3,921
4,117
Other Income
4,732
2,760
2,079
2,120
2,163
Profit before tax
16,611
14,486
10,456
12,540
14,329
% chg
26.4
(12.8)
(27.8)
19.9
14.3
Tax Expense
4,025
3,082
464
2,884
3,439
(% of PBT)
24.2
21.3
4.4
0.2
0.2
Recurring PAT
12,586
11,403
9,992
9,656
10,890
Minority Interest
(5)
(0)
6
6
6
Share of associates
-
-
-
-
-
Reported PAT
12,591
11,404
9,986
9,650
10,884
Adjusted PAT
12,591
11,404
9,986
9,650
10,884
% chg
16.2
0.0
(12.4)
(3.4)
12.8
(% of Net Sales)
16.4
14.4
12.4
11.1
11.0
November 20, 2015
6
NTPC | 2QFY2016 Result Update
Balance Sheet (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E
SOURCES OF FUNDS
Equity Share Capital
8,245
8,245
8,245
8,245
8,245
Reserves & Surplus
72,995
78,758
73,849
78,485
84,357
Shareholders Funds
81,241
87,003
82,094
86,731
92,602
Minority Interest
645
680
888
894
900
Total Loans
70,419
81,455
94,003
98,703
1,03,638
Deferred Tax Liability
1,081
1,239
1,266
1,266
1,266
Other Long term liabilities
4,458
5,914
6,019
6,260
6,511
Total Liabilities
1,57,843
1,76,293
1,84,270
1,93,854
2,04,917
APPLICATION OF FUNDS
Gross Block
1,13,804
1,31,394
1,43,394
1,56,594
1,85,394
Less: Acc. Depreciation
41,971
47,186
52,750
58,825
65,751
Net Block
71,833
84,208
90,643
97,768
1,19,643
Capital Work-in-Progress
46,555
53,825
68,764
70,764
55,764
Goodwill
0
0
0
0
0
Investments
4,923
3,300
1,902
1,902
1,902
Current Assets
42,903
42,823
39,904
30,615
37,569
Cash
18,738
17,051
14,252
7,622
10,287
Inventories
4,641
6,062
7,972
6,236
7,146
Debtor
6,096
6,726
9,250
7,327
8,706
Other
13,428
12,985
8,430
9,430
11,430
Current liabilities
20,933
23,820
35,306
26,293
29,823
Net Current Assets
21,970
19,002
4,598
4,322
7,747
Other Assets
12,562.5
15,957.1
18,362.7
19,097.2
19,861.1
Total Assets
1,57,843
1,76,293
1,84,270
1,93,854
2,04,917
November 20, 2015
7
NTPC | 2QFY2016 Result Update
Cash flow statement (Consolidated)
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E
Profit before tax
16,611
14,486
10,456
12,540
14,329
Depreciation
3,827
4,774
5,565
6,075
6,925
Change in Working Capital
(410)
(1,281)
1,748
(6,354)
(759)
Others
(541)
1,178
(2,198)
(728)
(758)
Direct taxes paid
(2,980)
(2,687)
(464)
(2,884)
(3,439)
Cash Flow from Operations
16,508
16,469
15,107
8,648
16,298
(Inc.)/ Dec. in Fixed Assets
(20,406)
(18,948)
(26,939)
(15,200)
(13,800)
(Inc.)/ Dec. in Investments
1,629
1,622
1,399
0
0
Others
1,932
1,817
0
0
0
Cash Flow from Investing
(16,845)
(15,509)
(25,540)
(15,200)
(13,800)
Issue of Equity
-
-
-
-
-
Inc./(Dec.) in loans
10,010
9,385
12,548
4,700
4,935
Dividend Paid (Incl. Tax)
(3,550)
(5,019)
(5,019)
(5,019)
(5,019)
Others
(5,472)
(7,014)
105
241
250
Cash Flow from Financing
988
(2,648)
7,634
(78)
167
Inc./(Dec.) in Cash
651
(1,687)
(2,799)
(6,630)
2,665
Opening Cash balances
18,087
18,738
17,051
14,252
7,622
Closing Cash balances
18,738
17,051
14,251
7,622
10,287
November 20, 2015
8
NTPC | 2QFY2016 Result Update
Key ratios
Y/E March
FY2013
FY2014
FY2015
FY2016E
FY2017E
Per Share Data (`)
Reported EPS
15.3
13.8
12.1
11.7
13.2
Adjusted EPS
13.8
13.8
12.1
11.7
13.2
Cash EPS
19.9
19.6
18.9
19.1
21.6
DPS
5.8
5.8
5.8
5.8
5.8
Book Value
98.5
105.5
99.6
105.2
112.3
Valuation Ratio (x)
P/E (on FDEPS)
8.7
9.6
11.0
11.4
10.1
P/CEPS
6.7
6.8
7.1
7.0
6.2
P/BV
1.4
1.3
1.3
1.3
1.2
Dividend yield (%)
4.3
4.3
4.3
4.3
4.3
EV/Sales
2.3
2.2
2.4
2.3
2.1
EV/EBITDA
8.9
8.8
10.8
9.8
8.8
EV/Total Assets
1.0
1.0
1.0
1.0
1.0
Returns (%)
ROCE
10.0
9.3
6.9
7.9
8.5
ROE
16.2
13.6
11.8
11.4
12.1
Turnover ratios (x)
Asset Turnover (Gross Block)
0.7
0.6
0.6
0.6
0.6
Inventory (days)
23.2
24.7
31.8
29.8
24.7
Receivables (days)
33.6
29.6
36.2
34.7
29.6
Payables (days)
68.4
68.8
98.4
98.5
68.7
WC cycle (ex-cash) (days)
23.4
12.0
(17.4)
(27.2)
(10.8)
Solvency ratios (x)
Net debt to equity
0.6
0.7
1.0
1.1
1.0
Net debt to EBITDA
0.7
0.8
0.8
0.9
0.9
Interest Coverage (EBIT / Int.)
5.8
4.7
3.3
3.7
4.0
November 20, 2015
9
NTPC | 2QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
NTPC
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
November 20, 2015
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