NTPC’s volumes grew 10% y-o-y on the back of higher Plant Load Factor (PLF) in Q1FY10 at 92.8% as against 89.1% in Q1FY09, probably due to higher load factors at the gas-based plants.
The company’s realisations in Q1FY10 were up 15% YoY. We had mentioned in our Q4FY09 update that the results were marginally below expectations on account of higher fuel costs not being passed on in the last quarter.
We believe that these higher realisations are partially on account of the pass-through of fuel costs being actually realised. Thus, for Q1FY10 NTPC’s revenues were at Rs120.03 billion, up 26% y-o-y.
NTPC’s EBITDA was up 30% y-o-y to Rs37.01 billion, indicating an EBITDA margin expansion of 102bps to 29.5% in Q1FY10 vs 28.5% in Q1FY09. Staff costs grew marginally at only 2% y-o-y.
Profitability is also higher due to the new tariff policy, including the RoE hiking being allowed from this quarter. NTPC reported an EPS of Rs2.7 in Q1FY10, a 30% y-o-y growth.
We believe that though NTPC’s management professes confidence in achieveing its 11FYP capacity addition target of 22GW; the company would be able to add only 18GW of capacity.
Of this, NTPC has already added 2.74GW and we expect another 1.65GW to be added in FY10, thus missings its 11FYP target by ~4GW (including ~1.7GW yet to be awarded).
At Rs214, the stock trades at 2.6x our FY11E book value of Rs83, and 18.7x our FY11E earnings of Rs11.5.
These valuations are at the upper end of the historical multiples, thus discounting NTPC’s earnings growth and capacity additions. We maintain a SELL rating with a PO of Rs205.