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NTPC Q4FY13 Result Update - Emkay Global Financial Services Ltd.

NTPC Q4FY13 Result Update - Emkay Global Financial Services Ltd.

NTPC Q4FY13 Result Update - Emkay Global Financial Services

Emkay © Your success is our success May 13, 2013 Rating Reduce CMP Rs155 EPS Chg FY13E/FY14E (%) Previous Reco Reduce Target Price Rs158 NA/-1.4 Target Price change (%) - Nifty 6,095 Sensex 20,083 Price Performance (%) 1M 3M 6M 12M Absolute 9 5 -7 4 Rel. to Nifty 0 2 -13 -15 Source: Bloomberg Relative price chart 175 160 145 130 115 Rs 100 -20 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Source: Bloomberg Stock Details Sector Bloomberg NTPC (LHS) Rel to Nifty (RHS) % 10 4 -2 -8 -14 Power NTPC IB Equity Capital (Rs mn) 82,455 Face Value(Rs) 10 No of shares o/s (mn) 8,245 52 Week H/L 176/ 136 Market Cap (Rs bn/USD mn) 1,278/ 23,394 Daily Avg Volume (No of sh) 7,791,034 Daily Avg Turnover (US$mn) 21.2 Shareholding Pattern (%) Mar'13 Dec'12 Sep'12 Promoters 75.0 84.5 84.5 FII/NRI 9.4 4.4 4.0 Institutions 10.5 7.5 7.7 Private Corp 3.0 1.6 1.8 NTPC Weak 4Q13 result; maintain Reduce • NTPC’s 4Q13 APAT at Rs21.2bn was significantly below our and consensus est of Rs26.1bn. Key adjustment (pre-tax) of Rs25.2bn for interest, prov. write-back of DESU receivables • Core ROE in 4Q13 stood at 4.7% vs. our estimate of 6.6%. FY13E core ROE at ~23.7% vs estimate of 24.6%, which led to FY13 standalone APAT of 91bn vs. exp of Rs95bn • We fine-tune our FY14/FY15 estimates by 1% each. The risk to ROE remains from - 1) Grossing up of tax (2.5%), 2) PAF incentives (1.2%), 3) UI income (0.8%) and 4) Heat rate incentives (2.7%), • Despite capacity and regulated equity growth, earnings growth remains doubtful. We maintain Reduce rating on the stock with PT of Rs158/sh (FY14 based). We will be buyers in the stock at Rs.145/sh. 4QFY13 result below expectations NTPC’s 4Q13 APAT at Rs21.2bn (adjusted for prior-period sales) grew by 1.2% yoy. Reported PAT of Rs43.8bn had adjustment – 1) interest income (Rs16.4bn) on DESU receivables & 2) provision write-back (Rs8.4bn) for the same, 3) Rs1.1bn prior-period tax reversal, 4) Rs784mn prior-period sales. The coal-based plants reported PAF at 92.7% (-205bps yoy) and PLF at 86.9% (-422bps yoy) in Q4 and the management attributed the decline problems in tying up coal import, even though the domestic coal supply has improved significantly. The domestic coal supply during FY13 was 145.9mnt vs 129mnt in FY12. The company plans to import ~25mnt of coal in FY14 vs. 9mnt import in FY13.The consol. APAT for FY13 stood at Rs91bn vs. expectation of Rs98bn. We have fine-tuned our FY14/FY15 EPS estimates by 1% each Risks to ROE persist, maintain Reduce with a PT of Rs158/sh NTPC’s business model is undergoing a structural change and the core ROE of the company is under pressure. The core ROE has consistently moderated over last 3 years from the peak of 28.2% in FY10 to 23.7% in FY13. With the current business environment, it is like to remain under pressure due to various factors mentioned above. It is difficult to quantify the exact drop in ROE and hence our earnings estimate assume flat ROE level; however we have assumed a 2.4% structural drop in ROE to arrive at our DCF-based target price of Rs158/sh. Key risks - (1) increase in PAF on higher CIL supplies for its old plants, assuming CIL takes decisions based on commercial gains and (2) regulatory risk from new tariff norms (FY14E-19E). Exhibit 1: NTPC - Quarterly ROE trend NTPC - Quarterly Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Effective Regulated Equity (Rs.bn) 257 263 263 281 284 296 296 Regulated Profits (Rs.bn) 12.2 17.4 19.4 18.3 15.0 20.8 15.0 ROE 4.8% 6.6% 7.4% 6.5% 5.3% 7.0% 5.1% Source: Company, Emkay Research Result Update Public 2.2 2.0 2.0 Source: Bloomberg Financial Snapshot (Consolidated) (Rsmn) Amit Golchha amit.golchha@emkayglobal.com +91-22-66242408 Anup Kulkarni, CFA anup.kulkarni@emkayglobal.com +91-22-66121281 YE- Net EBITDA EPS EPS RoE EV/ Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV FY12A 614,622 135,248 22.0 93,233 11.3 0.5 13.0 13.7 11.3 1.7 FY13A 648,380 162,781 25.1 90,656 11.0 -2.8 11.6 14.1 9.8 1.6 FY14E 722,745 176,093 24.4 106,389 12.9 17.4 12.6 12.0 9.3 1.5 FY15E 810,784 199,324 24.6 116,497 14.1 9.5 12.8 11.0 8.4 1.4 Emkay Global Financial Services Ltd. 1

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