Emkay Global Financial Services has maintained `Buy` on NTPC with a price target of Rs 204 as against the current market price (CMP) of Rs 172 in its report dated Jan. 30, 2012. The broking house gave the following rationale:
Higher R&M and water charges resulted into lower profitability:
NTPC`s 3Q12 PAT of Rs 21.3 billion against our estimates of Rs 22.6 billion, lower by 10% y-o-y and 12% q-o-q, due to under recovery on water charges (Rs 772 million) and higher maintenance expenses. NTPC has pre-pone the plants maintenance to 3Q12 which resulted into incremental R&M expenses of Rs1.5billion. Adjusting for one offs (previous yr sales is not considered to be one-off), APAT stood at Rs 21.7 billion whereas comparable profit (adjusted for PY sales) at Rs 23.5 billion. Gross generation during the qtr has increased by 3% y-o-y to 56.4BU driven by 1660MW of commercialized capacity addition since 3Q11. Revenues stood at Rs 153.3 billion, up 14% y-o-y primarily driven by realizations (Rs 3.02/unit), up 20% y-o-y. Increase in fuel cost (up 26% y-o-y on per unit basis) has largely contributed to better realizations during the quarter.
Reduce our assumptions for COD in FY12E and PAF:
The PAF of coal stations remained low at 86.2% (YTD) whereas only 1160MW commercialized till date in FY12. Given the structural challenges, we reduce our assumptions for PAF (from 90% to 88.5%) and commercialized capacity addition for FY12 (from 2820MW to 2320MW). Our new assumptions are based on structural challenges facing up by NTPC like- 1) limited fuel availability, 2) logistics constraints and 3) slowdown in execution.
90%+ PAF structurally coming down; maintain Buy:
Courtesy to its regulated price based business model, NTPC has been able to pass on the increasing variable cost and recover the fixed cost. However acheiving commissioning target of 4980MW (on best efforts basis) in FY12E would be challenging with only 1320MW commissioned and 1160MW commercialized till date. We reiterate that FY12 is sunset yr of 80IA and NTPC might surprise positively in commissioning and COD in last quarter of FY12E with another 1160MW ready for commercialization. We have reduced our consolidated earnings estimates to Rs 11.2 and Rs 12.4/share for FY12E/FY13E.
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