NTPC Ltd shares have been inching up steadily, gaining some 12.4% since March and beating the benchmark index. Not without a reason.
At last, the utility had made good on its promises of capacity addition. After adding roughly 1,000 megawatts (MW) in the first nine months of the last fiscal, NTPC installed an additional 1,490MW in the three months ended March.
Sure, the overall capacity addition of 2,490MW for the last fiscal was short of (an already scaled down) target of 3,150MW for the year, but investors are in no mood to quibble. At a time when power firms are struggling with execution, they are glad to see something on the ground.
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No wonder then, they pushed up the stock another 1.8% on Wednesday after the company declared its provisional results for the previous quarter. NTPC reported net sales of Rs 14,488 crore for the quarter ended March, up 17.74% from a year ago. Profit after tax grew 24.17% to Rs 2,505 crore.
These are provisional results and it’s unknown whether a change in tax rate was responsible for this jump in profits. For the first three quarters, NTPC had been using the minimum alternate tax rate that had led to depressed profits. If it reverted to using the normal rate for the whole fiscal, a write-back of that amount could lead to a jump in profits for the March quarter, according to JPMorgan Chase and Co.
That becomes more important because NTPC’s power generation hasn’t really picked up in the March quarter despite reporting its highest ever output of 220.54 billion units for the year, up 0.8% from the previous fiscal. In the March quarter, NTPC’s power output fell 2.2%.
The coming quarters may prove to be more fruitful. The new power plants commissioned in March will start generation. They should start telling on profits, provided state electricity boards agree to evacuate power. NTPC has tied up power purchase agreements for 100,000MW of power and fuel linkages for around 11,000MW under construction. The firm also confidently said it would add 4,320MW in the next fiscal, which should significantly add to its capabilities. For now, investors are buying into that vision.
Graphic by Yogesh Kumar/Mint
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