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COMPANY
REPORT
September 20, 2011
NTPC Ltd. Most visible capacity play
COMPANY
REPORT
CMP Rs169
Target Price Rs188
Potential Upside/Downside +11%
Relative to Sensex
Summary
With ~35GW installed capacity NTPC is the second largest IPP in the world. The company is planning to
take its capacity to 67GW (~32GW additional) by the end of 12th plan, of which visibility over 27GW
is very high. However, fuel supply is expected to remain stretched in near term but operational
efficiency would remain intact. We expect NTPC to report 17% revenue and 20% earnings CAGR over
FY11FY14E.
AT CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E
earnings. Based on equal weightages to P/BV and SOTP methods, we arrive at a price target of
Rs188/share. Recommend ACCUMULATE.
Investment Highlights
Nearly double capacity by FY17
NTPC is set to add 3.8GW to take its capacity to 39.1GW by end-FY12. Moreover, NTPC has additional
27.4GW capacity under various stages of development (9.8GW-under construction, 13.1GW-under bulk
tendering and 4.5GW-under implementation stages). In our view, given the historical capacity addition rate,
the company should be able to add 2.8GW by end-FY12E and ~23GW during entire 12th plan, which
would take the total installed capacity to 62GW (v/s company’s plan of 66.5GW) by end-FY17.
Fuel supply to remain stretched
NTPC’s 90% of 35.4GW installed capacity is coal based. The company requires 164MMT coal for FY12, out
of which 141MMT (+14MMT compared to FY11) would be sourced domestically and 14MMT (+4MMT
compared to FY11) would be imported. However, CIL’s dispatches guidance for FY12 would lead to lower
supply to NTPC. Moreover, gas supply from K-G D6 to NTPC’s ~4GW gas based capacity has been
disappointing. We believe, even with higher imported coal and additional domestic coal from SCCL (recently
tied 5MMT at premium to existing contract) NTPC has to operate at lower than historical average PLF.
Operation and collection efficiency to be maintained
NTPC operated its plants at an average PLF/PAF of 87%/90% against all India 77%/82% during FY11.
However, given the stretched fuel supply, NTPC is expected to operate at below average PLF of 82%/80%
for FY12E/FY13E. However, the company should not lose in terms of incentives as we expect plant
availability to be maintained at 90%. Moreover, given the strict payment security mechanism, NTPC is
expected to maintain its 100% collection efficiency trend in future.
Outlook and Valuation
We arrive at a target price of Rs188/share based on equal weightages to P/BV and DCF based SOTP
methods. Our SOTP value stands at Rs184, and P/BV based value stands at Rs191 (2x FY13E BV).
At CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E
earnings. Recommend ACCUMULATE.
Source: Capitaline
ACCUMULATE
Nifty: 5,032; Sensex: 16,745
Analyst
Rohit Singh
+91-22-4322 1186
Sector Power
Bloomberg / Reuters NATP IN / NTPC.BO
Shares o/s (mn) 8,245.5
Market cap. (Rs mn) 1,393,483
Market cap. (US$ mn) 29,157
3-m daily average vol. 222,570
Key Stock Data
52-week high/low Rs222/160
-1m -3m -12m
Absolute (%) (3) (3) (18)
Rel to Sensex (%) (6) 1 (2)
Price Performance
Promoters 84.5
FIIs/NRIs/OCBs/GDR 3.6
MFs/Banks/FIs 8.3
Non Promoter Corporate 1.5
Public & Others 2.1
Shareholding Pattern (%)
Table: Financial snapshot (Rs mn)
Year Revenue EBITDA Adj. PAT EPS (Rs) BV (Rs) P/E (x) P/BV(x) RoE (%) RoCE (%)
FY09 419,752 138,285 83,096 10.1 69.6 16.8 2.4 15.1 13.0
FY10 463,777 152,666 86,503 10.5 75.7 16.1 2.2 14.4 12.8
FY11 549,387 150,457 74,639 9.1 82.3 18.7 2.1 11.5 11.7
FY12E 598,576 182,006 85,968 10.4 88.3 16.2 1.9 12.2 12.9
FY13E 696,012 208,884 96,564 11.7 95.6 14.4 1.8 12.7 12.8
Source: Company; IDBI Capital Research
70
80
90
100
110
Sep
/10
Oct
/10
Nov
/10
Dec
/10
Jan/
11
Feb
/11
Mar
/11
Apr
/11
May
/11
Jun/
11
Jul/1
1
Aug
/11
Sep
/11
NTPC Sensex
2
Company Report – NTPC Ltd.
Investment Positives
Nearly double capacity by FY17
NTPC has installed capacity worth 35.4GW capacity (3.4GW owned under JV) as on September 20, 2011. The company has
added highest ever capacity of 2.5GW (1.6GW commercially operational) during FY11 and also synchronized 660MW
at Sipat and 500MW at Simhadri II as on September 20, 2011. The company plans to add 3.8GW more during FY12,
which would take the total capacity to 39.1GW at the end of 11th plan. During FY12, NTPC is expected to add
1x 500MW at Simhadri II, 2x 660MW at Sipat, 1x 500MW at Mauda I. Additionally, under JVs route, the company is
expected to add 2x 500MW at Jhajjhar and 2x 500MW at Vallur. However, given the historical capacity addition trend,
we expect NTPC to add another 2.8GW during FY12. Consequently, the company would be closing 11th plan
(FY08FY12) with 38.2GW capacity in place.
Figure: FY12 targeted capacity addition
Source: Company; IDBI Capital Research
Moreover, NTPC has additional 27.4GW capacity under various stages of development, out of which, 9.8GW is under
construction, 13.1GW is under bulk tendering and 4.5GW is under implementation stages for 12th plan commissioning.
13.1GW under bulk tendering includes 9 units of 660MW and 9 units of 800MW to be commissioned during 12th plan. Of
the 9.8GW under construction, NTPC would add 8.5GW (3.3GW under JV) coal based and rest 1.3GW hydro capacity to
diversify fuel mix. Keeping in view, the capacity under construction, under bulk tendering and other visible capacity to get
commissioned during 12th plan, NTPC is aspiring to attain 66.5GW by the end-FY17. However, in our view, the company
would see slippages to the extent of 4.5GW (lower visibility over other planned projects) and add ~23GW during entire 12th
plan, which would take the total installed capacity to ~62GW (v/s company’s plan of 66.5GW) by end-FY17.
Figure: NTPC aspired to achieve 67GW by the end of 12th five year plan
Source: Company; IDBI Capital Research
500
1000 1000
1320
0
200
400
600
800
1,000
1,200
1,400
1,600
Mouda, Stage- I Jhajjar Vallur Sipat, Stage- I
(MW
)
35.4
66.5
62.13.8
9.8
13.1
4.5
20
25
30
35
40
45
50
55
60
65
70
Q1FY12 FY12 Under construction for 12th plan
Bulk tendering Other capacity FY17 IDBIe- FY17
(GW
)
We expect NTPC to
close FY12 with
38.2GW capacity
Our own view is that
NTPC will have a
shortfall of 5GW for its
12th plan target and
would have 62GW
capacity by end-FY17
Company Report – NTPC Ltd.
3
Figure: Projects under construction
Source: Company; IDBI Capital Research
Recent ordering of 9x800MW improves visibility
NTPC has ordered BTG for its 9 units of 800MW. The company has finalized its international competitive bidding, under
which Korean equipment manufacturing company Doosan has emerged as L1 (would get 5 units) and BHEL is L2
(would get 4 units) for boilers’ order. For T-G orders, BGR Energy Systems has been finalized L1 (would get 5 units),
BHEL L2 (would get 2 units) and L&T L3 (would get 2 units). The company has been able to negotiate for very
competitive prices (Rs0.9 mn/MW for T-G sets and Rs16 mn/MW for boilers). These units would be used at Lara in
Chhattisgarh (2x800MW), Darli Palli (2x800MW), Gajmara in Orissa (2x800MW) and Kudgi in Karnataka (3x800MW).
Table: Supercritical TG set order wins
Company Projects MW Client Order size (Rs mn) Realization (Rs mn/MW)
L&T Krishnapattnam 1600 APPDCL 15,570 9.7
BHEL Barh-II 1320 NTPC 14,540 11.0
BHEL NA 1320 NTPC-DVC 11x660MW 15,665 11.9
BHEL Mauda 1320 NTPC-DVC 11x660MW 15,665 11.9
BF-Altsom NA 3300 NTPC-DVC 11x660MW 39,163 11.9
Toshiba-JSW NA 1320 NTPC-DVC 11x660MW 15,663 11.9
BGR NA 4000 NTPC-DVC 9x800MW 36,000 9.0
Source: Company; IDBI Capital Research
Table: Supercritical Boilers order wins
Company Projects MW Client Order size (Rs mn) Realization (Rs mn/MW)
BHEL Krishnapattnam 1600 APPDCL 25,000 15.6
BHEL Barh-II 1320 NTPC 18,000 13.6
Doosan NA 7200 NTPC 9x800MW 1,15,200 16.0
L&T NA 7200 NTPC 9x800MW 1,26,000 17.5
BGR NA 7200 NTPC 9x800MW 1,29,600 18.0
Source: Company; IDBI Capital Research
1980
1500
1320
1320
1000
1000
1000
1000
1000
800
750
520
490
0 400 800 1200 1600 2000 2400
Barh-I
Vallur
Sipat-I
Barh II
Jhajjar
Mauda-I
Rihand III
Vindhyachal -IV
Nabinagar
Koldam
Bongaigaon
Tapovan Vishnugad
NCTPP- II, Dadri
(MW)
0
10
20
30
40
50
60
70
80
Total
(MW
)
Coal-own Hydro-own Coal-JV
4
Company Report – NTPC Ltd.
9x660MW would be ordered before March 2012
The bulk tendering for 9 units of 660MW by NTPC has got further delays on account of Ansaldo Caldaie Boilers India
Pvt. Ltd. (Ansaldo) filling a suit in the High Court, after being disqualified from the bidding process for the steam
generator (SG) package of this bulk tender. However, NTPC has already issued Letters of Intent (LoI) for the TG
packages of its Solapur STPP, Mauda-II TPP and Meja TPP to Alstom-Bharat Forge JV, BHEL and Toshiba,
respectively. Further, the company plans to order SG and TG sets for all the 9 units of 660MW. These units would be
used at Solapur (2x660MW), Mauda II (2x660MW), Meja (2x660MW) and Nabinagar (3x660MW) power projects.
The company has guided for the entire equipment ordering before March’ 12.
Table: Capacity under bulk tendering
Name State Capacity (MW) Fuel Type
Solapur Maharashtra 1320 Coal
Mauda II Maharashtra 1320 Coal
Lara Chhattisgarh 1600 Coal
Darlipalli I Orissa 1600 Coal
Gajmara I Orissa 1600 Coal
Kudgi I Karnataka 2400 Coal
JVs and subsidiaries
Meja UP 1320 Coal
Nabinagar Bihar 1980 Coal
Total 13140
Source: Company; IDBI Capital Research
Fuel supply to remain stretched
90% of NTPC’s 35.4GW installed capacity is coal based. The company requires 164MMT coal for FY12, out of which
141MMT (+14MMT compared to FY11) would be sourced domestically and 14MMT (+4MMT compared to FY11) would
be imported. The company is expecting additional 12MMT coal from Coal India (CIL), which is ~50% of the Coal India’s
additional coal production for FY12. Moreover, CIL is committed to supply coal to other projects worth 4.5GW during
FY12, which would lead to lower supply to NTPC. Therefore, NTPC has to rely on other costlier domestic and
international sources for coal. NTPC has entered into an MoU with SCCL, under which SCCL would supply 5MMT coal
to NTPC stations for a period of one year from July 1, 2011-June 30, 2012, in addition to supply of 10.2MMT coal per
annum under the existing fuel supply agreement. NTPC would pay Rs814/tonne extra on the long term contract price of
Rs600-1,900/tonne.
Figure: NTPC Coal requirement
Source: Company; IDBI Capital Research
0
30
60
90
120
150
180
210
0
6000
12000
18000
24000
30000
36000
42000
FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E FY14E
(MM
T)(M
W)
Coal based capacity (MW) Coal requirement (MMT)
Company Report – NTPC Ltd.
5
Gas supply to power sector has been dismal; the sector realized an average supply of less than 75% of the
requirement of ~82MMSCMD (for 90% PLF). NTPC with gas based capacity of 3955MW (~24% of all India gas based
capacity) requires 15.46MMSCMD gas for operating at a PLF of 85%. During Q1FY12, the company received
12.0MMSCMD (-23% of the requirement), the shortfall was mainly caused by 2.37MMSCMD less supply from K-G D6.
NTPC has already entered into long term contract for the supply of 9.0MMSCMD APM/PTM, 4.46MMSCMD from K-G
D6 and 2.0MMSCMD RLNG from GAIL. However, fall in gas production from K-G D6 (~20% from peak production of
60MMSCMD) would keep the gas supply to NTPC under stress.
Figure: Securing fuel requirement through various means
Source: Company; IDBI Capital Research
Mine cancelation dented captive coal supply
Coal Ministry has cancelled NTPC’s 5 coal blocks, citing a reason of no progress in those mines. The canceled coal
blocks are Chhati Bariatu, Chhati Bariyatu South, Kerandari, Brahmini (JV with CIL) and Chichro Pastimal (JV with CIL)
with a total reserve of ~3 bn tonnes. Meanwhile, NTPC reported the current status of these mines, which suggests that
de-allocated mines would take another 3-4 years (9 years from the date of allocation) for the production. NTPC is in line
with the time taken for the mine development domestically. Moreover, the power ministry has approached coal ministry
on behalf of NTPC, asking it to review its decision. We expect the coal blocks to be re-allocated to NTPC.
Table: Cancelled mines-May be re-allocated
Block State
Date of
allocation
Date of
de-allocation
Minable reserve
(MMT)
Reasons for de-
allocation
Chhati-bariatu Jharkhand 25-Jan-06 14-Jun-11 151 No progress made
Kerandari Jharkhand 25-Jan-06 14-Jun-11 142 No progress made
Brahmini (JV with CIL) Orissa 25-Jan-06 14-Jun-11 1,100 No progress made
Chichro Pastimal (JV with CIL) Orissa 25-Jan-06 14-Jun-11 1,164 No progress made
Chhati-bariatu (South) Jharkhand 25-Jul-07 14-Jun-11 543 No progress made
Source: Company; IDBI Capital Research
Currently, NTPC has 3 coal blocks (Pakri Barwadih, Dulanga and Talaipalli) with a mineable reserve of 1.5 bn tonnes.
The company has fast tracked the development process of Pakri Barwadih mine. Thiess Minecs India Pvt. Ltd. has
been appointed MDO for a period of 27 years. Pakri-Barwadih has received stage II forest clearance from MOE and is
in process of acquiring 9,206 acres of land for this mine. The company has approved an investment of Rs31.9 bn
(Rs2.6 bn already incurred); funding would be done with debt to equity ratio of 70:30. The mine is expected to be ready
for production by FY13. 2.34MMT coal is expected to be mined during FY13 and 15MMTPA from FY15 onwards.
Fuel Security
Coal
Gas
Long term FSA with CIL for 20 years
Standing linkage committee accorded approval for long term coal linkage/ of
LOA for all 11th plan projects
Developing captive coal blocks, Pakri Barwadih is expected to reach 15 MTPA by
FY14; Theiss has been appointed as an MDO for the project
International Coal Ventures Ltd. incorporated for acquisition, operation of coal mine/
block in Indonesia, Australia and Mozambique
Long term supply agreement with GAIL for 14.48MMSCMD
Supply of 2.5MMSCMD of RLNG with GAIL till 2019
Fall back agreements with GAIL, BPCL. IOC and GSPL
Government allocated 4.46MMSCMD from KG – D6
Hold 40% in a block awarded under NELP – V
Allotted 4 blocks under NELP-VIII; NTPC has 100% interest in one block and 10%
each in other 3 blocks
6
Company Report – NTPC Ltd.
The development of Dulanga (reserve-195 MMT) and Talaipalli (reserve-844 MMT) are also progressing gradually. The
company has incurred an overall expenditure of ~Rs5 bn and is expected to produce ~40MMTPA from FY17 onwards
(~15% of the total coal requirement then).
Table: Development of coal blocks
Pakri Barwadih Dulanga Talaipalli Chatti-Bariatu Kerandri
Date of allotment Oct-04 Jan-06 Jan-06 Jan-06 Jan-06
Mineable reserve (MMT) 503 195 844 151 142
Est. capacity (MMTPA) 15 7 18 7 6
Stripping ratio 4.2 2.7 4.1 1.8 4.4
End use project
Shortfall:
Lara (4000MW),
Darlipali (3200MW)
Darlipali
(3200MW) Lara (4000MW)
Barh II
(1320MW),
Tanda II
(1320MW)
Barh II
(1320MW),
Tanda II
(1320MW)
GR availability
Mining plan approval Y Y Y Y Y
Feasibility report Y P P P P
Investment approval Y N N N N
Expected commissioning FY13 FY15 FY15 NA NA
Stands canceled for now.
Source: Company; IDBI Capital Research
Funding CAPEX comfortably
NTPC has 13.7GW projects under construction, which requires significant capital spending. The company has finished
CAPEX of Rs121 bn for full year FY11 and plans CAPEX worth Rs164 bn for FY12. We anticipate Rs158 bn, Rs203 bn
and Rs363 bn of capital expenditure during FY12, FY13 and FY14 respectively. NTPC would be able to raise funds
comfortably as their debt to equity is around 0.6x, which would go to comfortable level of 1.0x after raising required debt
by FY14.
Figure: Required CAPEX
Source: Company; IDBI Capital Research
88
119
101
121
158
203
363
(20)
0
20
40
60
80
100
0
70
140
210
280
350
420
FY08 FY09 FY10 FY11 FY12E FY13E FY14E
(%)
(Rs
bn)
Capex (Rs bn) Growth (%)
Company Report – NTPC Ltd.
7
Figure: Enough headroom available to borrow funds
Source: Company; IDBI Capital Research
Operational efficiency provides with performance incentives
At the end of Q1FY12, the company had 34.4GW capacity under operation. The company operated its plants at an
average PLF and PAF of 87% and 90% against all India PLF and PAF of ~77% and ~82%. However, on account of
stretched fuel supply, the company would witness a dip in PLF going forward. We expect, NTPC to operate its plant at
an average PLF of 82% for FY12 and 80% for FY13. That said, the company should not lose in terms of incentives as
its based on plant availability, which we expect to be maintained at 90%.
Figure: Leader in operational efficiency as well
Source: Company; IDBI Capital Research
NTPC earns 15.5% post tax return on equity as a regulated player under CERC’s 2009-14 tariff guidelines. Moreover,
NTPC being very efficient power generator earns incentives over its fixed return. The company earned Rs16 bn as
unscheduled interchange revenue and incentives for PLF. We anticipate the similar revenue stream would keep coming
from UI and other incentives. However, due to CWIP to the tune of Rs459 bn/ Rs490 bn during FY12E/FY13E, RoEs
would remain under pressure. We expect RoE to remain at 12.2%/12.7% for FY12/FY13E.
0.00
0.20
0.40
0.60
0.80
1.00
1.20
0
50
100
150
200
250
300
FY09 FY10 FY11 FY12E FY13E FY14E
(x)
(Rs
bn)
Debt required (Rs bn) Debt/Equity (x)
65
70
75
80
85
90
95
FY07 FY08 FY09 FY10 FY11 FY12E FY13E
(%)
All India PLF NTPC PLF NTPC PAF
8
Company Report – NTPC Ltd.
Figure: Huge CWIP compresses RoEs
Source: Company; IDBI Capital Research
Collection efficiency stands strong
The company is enjoying 100% realization for last eight years and CERC’s 2009-14 payment guideline assures no
uncertainty on revenues. However, given the overall poor financial health of SEBs (forms major chunk of NTPC’s
customer base); the company is strictly following the strong payment security mechanism. State utilities are required to
establish Letter of Credit (LCs) to cover 105% of the average monthly billing. Additionally, the company has signed for
first charge over customers’ receivables after FY16.
0
3
6
9
12
15
18
0
100
200
300
400
500
600
FY07 FY08 FY09 FY10 FY11 FY12E FY13E
(%)
(Rs
bn)
CWIP (Rs bn) RoE (%)
Company Report – NTPC Ltd.
9
Outlook and Valuation
With ~35GW installed capacity NTPC is the second largest IPP in the world. The company is planning to take its
capacity to 67GW (~32GW additional) by the end of 12th plan, of which visibility over 27GW is very high. However,
fuel supply is expected to remain stretched in near term but operational efficiency would remain intact. We expect
NTPC to report 17% revenue and 20% earnings CAGR over FY11-FY14E.
AT CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E earnings. Based
on equal weightages to P/BV and SOTP methods, we arrive at a price target of Rs188/share. Recommend
ACCUMULATE.
Table: Peer group comparison
Company
Mkt. cap.
(US$ mn)
P/BV (x) EV/EBITDA (x) RoE (%)
Year-end
CY11E/
FY12E
CY12E/
FY13E
CY11E/
FY12E
CY12E/
FY13E
CY11E/
FY12E
CY12E/
FY13E
Torrent Power 2,264 March 1.7 1.5 5.9 5.7 21.0 18.4
Adani Power* 3,981 March 2.2 1.6 9.7 5.5 22.1 29.2
JSW Energy* 2,154 March 1.5 1.4 6.2 4.9 17.6 16.1
CESC* 739 March 0.6 0.5 5.2 5.5 8.2 8.4
Tata Power* 4,892 March 1.4 1.2 7.9 7.6 14.3 10.5
NTPC* 29,529 March 1.9 1.8 9.7 9.1 12.2 12.7
Median 3,123 1.6 1.5 7.1 5.6 16.0 14.4
Prem./(Dis.) to
Indian peers (%) 19 24 38 63 (24) (12)
Ratchaburi 2,128 Dec 1.3 1.2 8.1 7.7 12.4 12.2
Glow Energy 2,315 Dec 1.9 1.8 12.9 8.9 13.4 19.2
Huaneng Power 8,660 Dec 0.7 0.7 10.1 8.9 5 6.2
Huadian Power 2,614 Dec 0.4 0.4 12.9 10.5 0.6 2.3
Datang Power 7,871 Dec 0.6 0.6 11.6 9.9 6.2 7.2
GD Power 5,767 Dec 1.4 1.2 12.5 10.8 10.5 12.7
Median 4,191 1.0 1.0 12.1 9.4 8.4 9.7
Prem./(Dis.) to
Asian peers (%) 90 89 (20) (3) 46 31
* Companies under coverage Note: Conversion rates (US$1= Rs48.1= THB30.5 = CNY7.8 = HK$6.4), as on September 20, 2011
Source: Company; IDBI Capital Research; Bloomberg
We value NTPC at Rs191 based on P/BV multiple
Historically, on an average, NTPC has traded at 2.2x 1-year forward book value multiple. However, based on low RoEs
expectation over FY13, we have assigned ~20% discount to historical book value multiple. We value stock at 2.0x FY13
book value, which translates to Rs191 per share.
Table: P/BV multiple valuation
Parameter Multiple assigned FY13E BV Price/ share (Rs)
P/BV 2.0 93.5 191
Source: Company; IDBI Capital Research
NTPC trades at a
premium to most Indian
peers largely going to
capacity visibility and
lower fuel risk
Within large Asian
peers, NTPC scores in
terms of RoEs, and thus
trades at a premium
10
Company Report – NTPC Ltd.
SOTP value stands at Rs184/share
We have also valued stock on DCF based SOTP method, which comes to Rs184/share. Core business translates to
Rs150/share (13% RoE, 2% terminal growth after FY18), whereas cash and investments contribute Rs20/Rs15 per
share respectively.
Table: SOTP valuation
Rs/share
Core Business 150
Cash 20
Investments 15
Total Value per share 184
Source: Bloomberg; IDBI Capital Research
Table: Weighted average value
Method Value (Rs/share) Weightage (%)
SOTP 184 50
2x FY13 P/BV 191 50
Weighted average value 188
Source: Bloomberg; IDBI Capital Research
Company Report – NTPC Ltd.
11
Figure: 12m fwd PER (x)
Source: Bloomberg; Company; IDBI Capital Research
Figure: 12m fwd PBR (x)
Source: Bloomberg; Company; IDBI Capital Research
Figure: 12m EV/EBITDA (x)
Source: Bloomberg; Company; IDBI Capital Research
Figure: Premium / Discount (%)
Source: Bloomberg; Company; IDBI Capital Research
0
50
100
150
200
250
300
Nov
-04
May
-05
Nov
-05
May
-06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Feb
-11
Aug
-11
Price 10x 14x 17x 21x
0
50
100
150
200
250
300
Nov
-04
May
-05
Nov
-05
May
-06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Feb
-11
Aug
-11
Price 1.4x 1.8x 2.3x 2.7x
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Nov
-04
May
-05
Nov
-05
May
-06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Feb
-11
Aug
-11
EV 7x 8x 11x 13x
(40)
(20)
0
20
40
60
80
100
Nov
-04
May
-05
Nov
-05
May
-06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Feb
-11
Aug
-11
Historically, NTPC has
traded at average 17x
12m fwd EPS, with a
low of 10x and high of
27x. The company is
trading at 16.2x FY12E
EPS
At 1.9x P/BV, NTPC is
trading at ~10%
discount to its average
P/B multiple of 2.2x
NTPC is trading at 9.7x
EV/EBITDA (~10%
discount to its average
EV/EBITDA multiple)
The company has
traded at an average
premium of ~9% to Nifty
12m fwd P/E multiple
12
Company Report – NTPC Ltd.
Key Risks
Delays in bulk tendering of 9x660MW
The company is expected to add more than 27GW capacity during 12th plan, out of which 13GW comes from two bulk
tenders. There have been delays in ordering of these units on account of various reasons. According to the current
status, Ansaldo has filed a suit in the High Court to reconsider them, after being disqualified from the bidding process
for the steam generator (SG) package of this bulk tender. NTPC has put the case on fast track and expected to get
decision by the end of April 2011. However, any significant delays in decision process or ordering after that would
cause further capacity slippages. Moreover, in similar delays in ordering of equipments for all other planned capacity
would adversely affect the commissioning schedule and hence the cash inflow.
Fuel unavailability in near future
NTPC’s 89% of 35.4GW installed capacity is coal based. The company requires additional 26MMT coal during FY12
over FY11. This requirement would be fulfilled by additional 12MMT supply by CIL, ~4MMTadditional import (equivalent
to 6MMT domestic coal) and 10.2MMT additional coal supply contracted with SCCL. However, CIL’s despatch guidance
may lead to lower coal supply to NTPC. Which in turn would lead NTPC to either resort on costlier imported coal or
operate plants at lower PLF. In the event of plant operating at lower PLF, NTPC’s plant availability may also come
under pressure and lose in terms of incentives.
Company Report – NTPC Ltd.
13
Company Profile
NTPC is India’s largest power company, which was set up in 1975 with the mission of accelerating power capacity addition
in India. The total installed capacity of the company is 35,354MW (including JVs) with 15 coal based and 7 gas based
stations, located across the country.
Table: Installed capacity fuel wise Figure: Installed capacity region wise
Installed Capacity No. of Plants Capacity (MW)
NTPC Owned
Coal 15 28,035
Gas/Liquid Fuel 7 3,955
Total 22 31,990
Owned By JVs
Coal & Gas 4 3,364
Total 28 35,354
Source: Company
Source: Company; IDBI Capital Research
NTPC has set a target to have an installed capacity of 128GW by the FY32. The company is mainly into coal based power
generation (88% of 34GW at the end of FY11). However, the company is diversifying itself in terms of fuel mix so that to
reduce its dependence on coal. At the end of 12th plan (FY17), the company is expected to have 70% coal based, 14% gas
based, 12% Hydro and 4% Nuclear power plants.
Figure: Diversifying fuel mix
Source: Company; IDBI Capital Research
Northern31%
Western25%
Southern12%
Eastern22%
JVs10%
88%
80%
70%
12%
16%
14%
4%
12% 3% 1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
FY11
After 11th Plan
After 12th Plan
Coal Gas Hydro Nuclear Renewables
14
Company Report – NTPC Ltd.
Figure: Largest by far; holds 30% of all India thermal capacity
Source: CEA; Company; IDBI Capital Research
The company is moving towards supercritical and ultra supercritical technology, which helps in reducing CO2 emission, improving efficiency and containing fuel requirement. The company is in process of ordering 9 units of 660MW. Further tendering of 9 units of 800MW is in pipeline.
NTPC has ventured into consultancy, power trading, ash utilization, equipment manufacturing and coal mining. 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary is the second largest power trading company in the country. NTPC holds ~17% in ‘National Power Exchange Ltd.’, a JV of NTPC, NHPC, PFC and TCS. NTPC has formed JVs with BHEL and Bharat Forge Ltd. for power plant equipment manufacturing. Moreover, the company has ~45% stake in Transformers and Electricals Kerala Ltd. (TELK) for manufacturing and repair of transformers.
NTPC ranked 341st in the ‘2010, Forbes Global 2000’ ranking of the World’s biggest companies. The company was ranked #1 and #2 IPP in Asia and World by number of plants. NTPC became a Maharatna company in May, 2010, one of the only four companies to be awarded this status.
Diagram: Group NTPC - 5 Subsidiaries and 17 Joint ventures
Note: Figures in brackets indicate holding of NTPC
1 Pipavav Power Development Co. Ltd. (100%) under winding up; Source: Company; IDBI Capital Research
0
5
10
15
20
25
30
35
40
0
5000
10000
15000
20000
25000
30000
35000
40000
1991-92 1996-97 2001-02 2006-07 2009-10 2010-11
(%)
(MW
)
NTPC (MW) % of all India thermal capacity % of Total capacity
Power
Trading
National Power Exchange Ltd.
(16.67%)
Equipment Manufacturing
Transformers and Electricals
Kerala Ltd. (44.6%)
Coal Acquisition
CIL NTPC Urja Pvt. Ltd.
(50%)
Power
Generation¹
Ratnagiri Gas and Power
Pvt. Ltd. (29.65%)
Services
Energy Efficiency
Service Limited (25%)
NTPC Vidyut Vyapar
Nigam Ltd. (100%)
NTPC BHEL Power
Projects Pvt. Ltd. (50)%
BF NTPC Energy
Systems Ltd. (49%)
International Coal Ventures
Pvt. Ltd. (14.28%)
NTPC SCCL Global
Ventures Pvt. Ltd. (50%)
NTPC Hydro Ltd.
(100%)
Kanti Bijlee Utpadan
Nigam Ltd. (64.57%)
Bhartiya Rail Bijlee
Company Ltd. (74%)
Aravali Power Company
Pvt. Ltd. (50%)
NTPC Tamil Nadu Energy
Company Ltd. (50%)
Nabinagar Power Generating
Company Pvt. Ltd. (50%)
Meja Urja Nigam Pvt. Ltd.
(50%)
NTPC SAIL Power
Company Pvt. Ltd. (50%)
NTPC Electric Supply
Company Ltd. (100%)
Utility Powertech Ltd.
(50%)
NTPC Alstom Power
Services Pvt. Ltd. (50%)
National High Power Test
Laboratory Pvt. Ltd. (25%)
Subsidiaries
Joint Ventures
Synergy fuelling growth
Company Report – NTPC Ltd.
15
Diagram: Pan India Presence
Source: Company; IDBI Capital Research
KAYAMKULAM (350MW)
RGPPL (1480MW)
Kawas (645MW)
Gandhar (648MW)
ANTA (413MW)
Auraiya (652MW)
Faridabad (430MW)
Dadri (817MW)
Koldam (800MW)
Tapovan Vishnugad (520MW)
BTPS (705MW) NCTPP (1820MW)
Tanda (440MW)
UNCHAHAR (1050MW)
Rihand (3000MW)
Singrauli (2000MW)
Vindhyachal (4260MW)
Korba (2600MW)
Sipat (2980MW)
Ramagundam (2600MW)
Simhadri (2000MW)
Talcher Kaniha (3000MW)
Talcher Thermal (460MW)
Kahalgaon (2340MW)
Farakka (2100MW)
Bongaigaon (750MW)
BARH (3300MW)
Mauda (1000MW)
VALLUR (1000MW)
IGSTPP (1500MW)
Under Construction
Coal-own
Coal-JV
Hydro-own
Existing Presence
Gas-own
Coal- own
Gas-JV
Nabinagar (1000MW)
16
Company Report – NTPC Ltd.
Financial Summary
Profit & Loss Account (Rs mn)
Year-end: March FY09 FY10 FY11 FY12E FY13E
Net sales 419,752 463,777 549,387 598,576 696,012
Growth (%) 13.2 10.5 18.5 9.0 16.3
Operating expenses (314,176) (339,801) (423,617) (440,224) (512,902)
EBITDA 138,285 152,666 150,457 182,006 208,884
Growth (%) (4.4) 10.4 (1.4) 21.0 14.8
Depreciation (23,645) (26,501) (24,857) (27,227) (32,276)
EBIT 114,640 126,165 125,600 154,779 176,608
Interest paid (19,962) (18,089) (21,491) (26,468) (32,483)
Other income - - - - -
Pre-tax profit 94,678 108,076 104,109 128,311 144,125
Tax (11,582) (21,573) (29,470) (42,343) (47,561)
Effective tax rate (%) 12.2 20.0 28.3 33.0 33.0
Net profit 83,096 86,503 74,639 85,968 96,564
Adjusted net profit 83,096 86,503 74,639 85,968 96,564
Growth (%) 8.1 4.1 (13.7) 15.2 12.3
Shares o/s (mn nos) 8,246 8,246 8,246 8,246 8,246
Balance Sheet (Rs mn)
Year-end: March FY09 FY10 FY11 FY12E FY13E
Net fixed assets 593,426 668,656 775,066 898,357 1,054,562
Investments 139,835 148,071 123,448 131,412 146,027
Other non-curr assets 9,734 3,652 4,592 - -
Current assets 309,253 308,157 353,968 382,647 424,281
Inventories 32,434 33,477 36,391 40,095 46,882
Sundry Debtors 35,842 66,514 79,243 98,396 114,413
Cash and Bank 162,716 144,595 161,853 161,594 166,985
Loans and advances 68,467 55,131 66,011 71,155 82,738
Total assets 1,052,248 1,128,536 1,257,074 1,412,417 1,624,870
Shareholders' funds 573,701 624,174 678,923 728,232 788,136
Share capital 82,455 82,455 82,455 82,455 82,455
Reserves & surplus 491,246 541,921 596,468 645,777 705,681
Total Debt 345,678 377,970 431,882 537,246 669,182
Secured loans 345,678 377,970 431,882 537,246 669,182
Unsecured loans - - - - -
Other liabilities 371,661 396,781 447,422 551,195 683,131
Curr Liab & prov 139,381 138,286 158,253 169,443 194,549
Current liabilities 106,886 107,581 130,729 132,989 153,603
Provisions 32,495 30,705 27,524 36,454 40,947
Total liabilities 478,547 504,362 578,151 684,185 836,734
Total equity & liabilities 1,052,248 1,128,536 1,257,074 1,412,417 1,624,870
Book Value (Rs) 70 76 82 88 96
Source: Company; IDBI Capital Research
Cash Flow Statement (Rs mn)
Year-end: March FY09 FY10 FY11 FY12E FY13E
PAT 82,263 87,286 91,026 85,968 96,564
Depreciation 23,645 26,501 24,857 27,227 32,276
Def rev account against AAD - - 3,352 (624) -
Op. Cash flow before WC 82,222 94,539 105,163 117,163 128,839
(Inc)/Dec in Debtors (6,014) (30,671) (28,041) (19,153) (16,017)
(Inc)/Dec in Inventory (4,833) 119 (1,698) (3,704) (6,787)
Inc/(Dec) in Creditors & Prov. 16,577 (5,647) 14,787 2,260 20,613
(Inc)/Dec in Advances (14,428) 21,263 (6,933) (5,144) (11,583)
Other Current Assets (1,288) 641 (2,731) (937) (1,857)
Gross Cash flow from ops 72,236 80,244 80,546 90,485 113,210
Cash flow frm operations 72,236 80,244 80,546 90,485 113,210
Purchase of Fixed Assets (99,839) (107,701) (110,855) (150,519) (188,480)
Increase in Investments 16,920 (812) 34,199 (7,963) (14,615)
Investment in Subs and JVs (4,218) (7,402) (9,577) - -
Cash flow frm investing act (75,004) (104,977) (76,589) (158,482) (203,095)
Proceeds from Debt 50,934 43,276 50,476 105,363 131,936
Payment of Div. & Div. Tax (34,718) (36,639) (36,513) (36,659) (36,659)
Others (64) (25) (663) (965) -
Cash flow frm financing act 16,152 6,612 13,300 67,739 95,277
Change in Cash 13,384 (18,121) 17,258 (259) 5,391
Opening Cash 149,332 162,716 144,595 161,853 161,594
Closing Cash 162,716 144,595 161,853 161,594 166,985
Financial Ratios
Year-end: March FY09 FY10 FY11 FY12E FY13E
Adj EPS (Rs) 10.1 10.5 9.1 10.4 11.7
Adj EPS growth (%) 8.1 4.1 (13.7) 15.2 12.3
EBITDA margin (%) 32.9 32.9 27.4 30.4 30.0
Pre-tax margin (%) 22.6 23.3 19.0 21.4 20.7
ROE (%) 15.1 14.4 11.5 12.2 12.7
ROCE (%) 13.0 12.8 11.7 12.9 12.8
Turnover & Leverage ratios (x)
Asset turnover (x) 0.4 0.4 0.5 0.4 0.5
Leverage factor (x) 1.8 1.8 1.8 1.9 2.0
Net margin (%) 19.8 18.7 13.6 14.4 13.9
Net Debt/Equity (x) 0.3 0.4 0.4 0.5 0.6
Working Capital & Liquidity ratios
Inventory days 28 26 24 24 25
Receivable days 31 52 53 60 60
Payable days 86 83 89 80 80
Valuation
Year-end: March FY09 FY10 FY11 FY12E FY13E
PER (x) 16.8 16.1 18.7 16.2 14.4
Price / Book value (x) 2.4 2.2 2.1 1.9 1.8
PCE (x) 13.1 12.3 14.0 12.3 10.8
EV / Net sales (x) 3.8 3.5 3.0 3.0 2.7
EV / EBITDA (x) 11.4 10.7 11.1 9.7 9.1
Dividend Yield (%) 2.1 2.2 2.2 2.2 2.2
Company Report – NTPC Ltd.
17
Notes
Vikrant Oak – Head Institutional Equities (91-22) 4322 1385 [email protected]
Sonam H. Udasis – Head Research (91-22) 4322 1375 [email protected]
Dealing (91-22) 6637 1150 [email protected]
Key to Ratings
Stocks:
BUY: Absolute return of 15% and above; ACCUMULATE: 5% to 15%; HOLD: Upto ±5%; REDUCE: -5% to -15%; SELL: -15% and below.
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