NTPC’s reported revenues for FY09 were up 13% y-o-y to Rs419 billion, but EBITDA was lower by 3% y-o-y to Rs126 billion.
EBITDA margins slipped 483bps to 30.1% mainly due to higher fuel costs and wage revision provisions (Rs5.34bn in FY09 vs. Rs4.09bn in FY08).
The company’s reported PAT was up 11% y-o-y to Rs82 billion on the back of income tax refunds, and adjustments to interest expenses. EPS for FY09 was at Rs9.9 vs Rs9 for FY08.
Though NTPC’s management is confident of achieving its 22GW capacity addition target for the 11th five-year plan (11FYP), we believe it would miss the target by 4GW (projects of 1.7GW are yet to be awarded).
Though the company has 17.9GW of capacity under construction, it would only be able to add ~15GW in the next three years; the remaining ~3MW capacity expansion would thus be part of the 12th FYP.
Also, NTPC is expected to add 1,650MW (Sipat I 660MW, Kahalgaon II 500MW, and Dadri 490MW) vis-à-vis its guidance of 3,300MW for FY10E.
The Plant Load Factor (PLF) at NTPC’s coal stations was marginally lower at 91.1% (vs. 92.2% in FY08) mainly on account of forced outages.
The PLF at its gas-based stations was at 67.0% in FY09 vis-à-vis 68.1% in FY08; the reduction was on account of lower availability of fuel (gas).
At Rs202, NTPC trades at 2.4x our FY11E book value of Rs83.3, and 17.6x our FY11E earnings of Rs11.6.
However, these valuations are at the upper end of the historical multiples, thus discounting NTPC’s earnings growth and capacity additions.
Therefore, we downgrade the stock to SELL with a PO of Rs205.
Click here for a detailed report