Overall, NTPC’s provisional net revenues, at Rs421,824 million, and provisional unadjusted PAT, at Rs78,274 million, were up 14% y-o-y and 6% y-o-y respectively, but both 8.3% below our estimates.
The results, however, include adjustments for wage arrears of Rs14.02 billion. Adjustments for prior-period items, which are typical in the company’s results, have not been disclosed.
Growth in generation was higher by only 3%, at 206.9 billion units, on account of lower PLF as well as delays in meeting the targets in capacity addition. PLF dropped from 92.24% in FY08 to 91.14% in FY09.
Though the management had earlier shown confidence in meeting its capacity addition targets, a 500MW capacity addition has slipped from FY09 to FY10; this has increased the FY10 capacity addition target from 2.8GW to 3.3GW now.
NTPC had planned to add 22.43GW in the XI five-year plan. In the first two years of this plan, the company has been able to add only 2.7GW (12.2%).
Of the remaining 19.69GW (87.8%), 17.93GW (79.9%) is under construction and contracts for another 1.76GW (7.8%) are yet to be awarded.
As NTPC nears our target price of Rs217, we downgrade the stock to HOLD based solely on a price performance basis. Currently, the stock trades at 1.7x our FY10E book value (11.7x our FY10E earnings, implying a dividend yield of 2.6%).