21 August 2016
Update
| Sector:
Utilities
BSE SENSEX
31,525
S&P CNX
9,837
NTPC
Buy
CMP: INR173
TP: INR204 (+18%)
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Kudgi and Solapur projects on track
Earnings growth to accelerate; valuations attractive
We visited two of NTPCsa’s (NTPC standalone) major greenfield sites at Solapur
and Kudgi, which will add INR73.6b or 17% to regulated equity. Our key takeaways:
Kudgi (3 x 800MW = 2,400MW): On track for full CoD in FY18
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
NTPC IN
8245.5
179/143
4/-9/-8
1428.9
22.0
781
30.3
Financials Snapshot (INR b)
Y/E Mar
2017 2018E 2019E
Sales
820.8 849.9 974.4
EBITDA
218.3 249.2 323.0
NP
107.1 109.7 134.7
EPS (INR)
13.0
13.3
16.3
EPS Gr. (%)
5.4
2.4
22.9
BV/Sh. (INR )
118.7 126.6 136.9
P/E (x)
13.3
13.0
10.6
P/BV (x)
1.5
1.4
1.3
RoE (%)
11.5
10.8
12.4
RoCE (%)
7.0
7.3
8.8
Shareholding pattern (%)
As On
Jun-17 Mar-17 Jun-16
Promoter
69.7
69.7
70.0
DII
17.0
17.0
16.9
FII
10.2
10.4
11.0
Others
3.0
2.8
2.2
FII Includes depository receipts
Stock Performance (1-year)
NTPC
Sensex - Rebased
200
185
170
155
140
The project faced two major hurdles – land acquisition for approach rail line
and delays in coal handling plant due to financial stress of vendor. NTPC
overcame the first by building a viaduct (Exhibit 3) and the second by dealing
directly with the sub-vendors.
The project sources water from the Almatti dam, which is 43km away. There is
no shortage of water, as the dam has sufficient water.
The first unit of 800MW (Unit-1), which began commercial generation on July
31, 2017 (commercial operational date; CoD), was operating at 511MW (Exhibit
1). Though the ECR (energy charge rate) is ~INR3/kwh, it is getting scheduled in
the merit order. Coal is being sourced from SCCL under bridge linkages.
Unit-2 was commissioned on March 23, 2017. It has also achieved full load, but
CoD is pending due to delay in ramping up coal supply. CoD is planned in
September 2017.
Unit-3 is in the final stages of commissioning (Exhibit 2). The commissioning
and CoD is expected by December 2017. While this unit may be commissioned
by December, the CoD may spill over into FY19.
The first unit (660MW) was commissioned on April 7, 2017. The unit was
running at 264.4MW (Exhibit 4) at the time of our visit. There have been minor
leakages in the boiler tube, which are being addressed. Water is being sourced
through a 120km pipeline from nearby river. The railway siding too is
completed. Coal is being sourced from WCL through bridge linkage. Regular
coal supply is linked to MCL. CoD is expected latest by September 26. The ECR
is expected to be above INR2.5/kwh.
Unit-2: Boiler light-up is planned in March 2018. The unit is expected to be
synchronized in August 2018 and CoD is planned in December 2018.
NTPC has strong pipeline of CoDs. There is good visibility of 3.7GW of organic
and 1GW of inorganic growth at NTPCsa. This will add INR81b or 18.4% to
regulated equity in FY18. In addition, 445MW will be added to commercial
capacity of JVs in FY18. The visibility of CoDs for FY19 too is improving, with
expected commissioning of 2.65GW in FY18 (Exhibit 7).
We expect regulated equity to grow at ~20% CAGR and consolidated PAT to
grow at 12% CAGR over FY17-20. Capitalization would start to outpace capex,
boosting RoE and driving stock re-rating. The stock trades at 1.3x FY19E BV. We
value the stock at INR204/share even after factoring 150bp regulatory risk to
RoE from FY20 in our DCF model.
Maintain Buy.
Solapur (2 x 660MW): Expect unit-1 CoD by September 2017
Earnings growth to accelerate; valuations attractive
Sanjay Jain – Research analyst
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
Dhruv Muchhal – Research analyst
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.

NTPC
Exhibit 1: Kudgi unit-1 monitor shows that it was operating at 511MW on August 17, 2017
Source: MOSL, NTPC
Exhibit 2: Kudgi unit-3: Turbine under trial runs
Source: MOSL, NTPC
21 August 2016
2

NTPC
Exhibit 3: Kudgi: Viaduct to allow easy movement of villagers across railway siding
Source: MOSL, NTPC
Exhibit 4: Solapur unit-1 monitor shows that it was operating at 264.4MW on August 17, 2017
Source: MOSL, NTPC
21 August 2016
3

NTPC
Exhibit 5: Solapur: Turbine area
Source: MOSL, NTPC
Exhibit 6: Solapur site under construction
Source: MOSL, NTPC
21 August 2016
4

NTPC
Exhibit 7: Actual and expected schedule
Units
Fuel
MW
Commiss.
(still CWIP)
Commercial start
on
Status
18-Jul-15
30-Oct-15
18-Feb-16
FY16Q2
FY16Q2
FY16Q4
Project
Cost
53,401
31,804
47,500
132,705
22,497
39,607
62,105
50,554
39,607
22,497
50,554
33,631
46,976
59,230
58,193
50,554
22,497
40,000
283,820
11,566
18,734
30,300
11,566
18,734
45,413
54,105
18,734
Reg.
add.
16,020
9,541
14,250
5,233
45,044
6,749
11,882
7,654
26,285
15,166
11,882
6,749
15,166
10,089
14,093
17,769
17,458
15,166
6,749
8,000
81,146
3,470
5,620
9,090
3,470
5,620
13,624
16,232
5,620
Equity
Y/E
369,160
Year
FY15
FY16
FY16
FY16
FY16
FY17
FY17
FY17
FY18
FY18
FY18
FY18
FY18
FY18
FY19
FY19
FY19
FY19
FY18
FY18
FY17
FY17
FY17
FY18
FY18
Koldam
Vindhyachal V
Barh-II
Others
Bongaigaon-1
Mauda-II - U1
Others
Kudgi - U1
Mauda-II - U2
Bongaigaon-2
Kudgi - U2
Unchahar U6
Solapur U1
Lara U1
Gadarwara U1
Kudgi U3
Bongaigaon-3
Chhabra, Raj
in FY18E only
Joint Ventures
Kanti U3
BRBCL U1
Kanti -U4
BRBCL U2
NPGCL
Meja U1
BRBCL U3
Hydro
Coal
Coal
800
500
660
1,960
250
660
910
800
660
250
800
500
660
800
800
800
250
1000
4,670
195
250
445
195
250
660
660
250
414,204
Coal
Coal
28-Mar-16
01-Apr-16
01-Feb-17
FY17Q1
FY17Q4
440,489
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
26-Dec-16
19-Mar-17
23-Mar-17
23-Mar-17
01-Apr-17
07-Apr-17
Q3FY18
Q3FY18
Q3FY18
Q2FY18
Inorganic
31-Jul-17
Sep-17
Sep-17
Sep-17
Dec-17
Dec-17
FY19
FY19
FY19
FY19
FY18
FY18Q2
Pending
Pending
Pending
Pending
Pending
521,635
Coal
Coal
Coal
Coal
Coal
Coal
Coal
31-Mar-15
30-Mar-16
24-Mar-16
04-Apr-17
Q3FY18
18-Mar-17
16-Jan-17
01-Jul-17
Oct-17
FY19
FY19
FY19
FY17Q4
FY17Q4
FY18Q2
Pending
Source: MOSL
21 August 2016
5

NTPC
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Interest
Other Income - Rec.
Exceptional item
Profit before Tax
Tax
Tax Rate (%)
Reported PAT
Change (%)
2015
806,220
2.1
634,280
171,941
21.3
55,646
116,295
35,704
20,789
3,182
104,562
4,638
4.4
99,924
-12.4
2016
787,055
-2.4
595,423
191,632
24.3
61,534
130,098
41,513
12,341
110
101,035
-589
-0.6
101,624
1.7
2017
820,808
4.3
602,508
218,300
26.6
60,099
158,201
36,511
15,915
0
137,606
30,466
22.1
107,139
5.4
2018E
849,891
3.5
600,641
249,249
29.3
72,409
176,840
49,168
10,196
0
137,868
28,203
20.5
109,665
2.4
2019E
974,389
14.6
651,396
322,993
33.1
92,366
230,627
72,276
11,270
0
169,621
34,873
20.6
134,748
22.9
(INR Million)
2020E
1,092,056
12.1
704,990
387,066
35.4
113,411
273,655
96,059
13,024
0
190,620
39,386
20.7
151,234
12.2
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Deferred Tax Liability
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Others
Current Liabilities
Payables
Other current liabilities
Net Working Capital
Application of Funds
E: MOSL Estimates
2015
82,455
738,485
820,940
8,879
1,022,520
12,656
1,864,995
1,443,608
525,077
918,530
675,547
141
601,543
79,725
92,499
161,390
190,883
77,046
330,766
71,076
259,690
270,777
1,864,995
2016
82,455
809,511
891,965
8,928
1,120,194
14,094
2,035,181
1,632,140
587,180
1,044,959
815,497
148
543,886
79,592
101,740
57,370
202,075
103,110
369,310
68,266
301,044
174,577
2,035,181
2017
82,455
895,926
978,380
8,033
1,071,908
14,849
2,073,170
1,691,705
646,388
1,045,317
868,957
78,023
492,677
65,861
89,639
33,015
18,131
286,031
411,804
55,727
356,077
80,873
2,073,170
2018E
82,455
961,065
1,043,520
8,033
1,206,653
14,849
2,273,054
2,147,618
718,798
1,428,821
703,778
78,023
485,239
59,709
70,419
50,949
18,131
286,031
422,807
66,730
356,077
62,432
2,273,054
2019E
82,455
1,046,341
1,128,795
8,033
1,271,026
14,849
2,422,703
2,707,977
811,163
1,896,814
347,847
78,023
530,264
63,982
78,357
83,763
18,131
286,031
430,245
74,168
356,077
100,020
2,422,703
2020E
82,455
1,138,208
1,220,662
8,033
1,272,296
14,849
2,515,840
3,139,545
924,574
2,214,971
74,908
78,023
591,221
71,715
92,749
122,594
18,131
286,031
443,283
87,206
356,077
147,938
2,515,840
21 August 2016
6

NTPC
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoIC (Post-tax)
RoCE (Post-tax)
Working Capital Ratios
Debtor (Days)
Inventory (Days)
Payable (Days)
Growth (%)
Sales
EBITDA
PAT
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/EBITDA
Net Debt/Equity
2015
12.1
18.9
99.6
5.8
47.4
2016
12.3
19.8
108.2
3.4
27.2
2017
13.0
20.3
118.7
4.0
30.8
13.3
8.5
1.5
11.3
2.3
11.8
11.2
7.4
42
36
32
2.1
-12.8
-12.4
1.8
3.8
5.0
1.0
11.9
11.9
7.3
47
37
32
-2.4
11.5
1.7
1.5
3.4
5.5
1.2
11.5
10.9
7.0
40
29
25
4.3
13.9
5.4
1.2
4.8
4.8
1.1
2018E
13.3
22.1
126.6
4.5
33.8
13.0
7.8
1.4
10.4
2.6
10.8
11.1
7.3
30
26
29
3.5
14.2
2.4
1.1
3.8
4.6
1.1
2019E
16.3
27.5
136.9
5.0
30.6
10.6
6.3
1.3
8.1
2.9
12.4
10.9
8.8
29
24
28
14.6
29.6
22.9
1.2
3.3
3.7
1.1
2020E
18.3
32.1
148.0
6.0
32.7
9.4
5.4
1.2
6.7
3.5
12.9
10.5
10.0
31
24
29
12.1
19.8
12.2
1.3
3.0
3.0
0.9
Cash Flow Statement
Y/E March
Profit/(Loss) before Tax
Interest
Depreciation
(Inc)/Dec in WC
Tax paid
others
CF from Operations
Capex
(Pur)/sale of Invest.
Int. & Div. Income
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
finance cost
Dividend (incl. tax)
Others
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2015
104,562
35,286
55,646
-11,694
-20,100
-16,242
147,459
-191,772
16,391
17,037
145
-158,200
205,811
-72,371
2016
101,035
41,090
61,534
-36,422
-14,584
1,452
154,106
-232,470
16,536
9,528
-16,514
-222,920
80,528
-83,473
2017
137,606
36,511
60,099
307
-30,466
-15,915
188,141
-339,462
17,032
15,915
-306,514
171,164
-36,511
-39,578
95,075
-23,298
57,369
34,072
2018E
137,868
49,168
72,409
36,376
-28,203
-10,196
257,421
-290,734
10,196
-280,539
134,745
-49,168
-44,525
41,052
17,935
34,072
52,006
2019E
169,621
72,276
92,366
-4,774
-34,873
-11,270
283,346
-204,427
11,270
-193,157
64,373
-72,276
-49,473
-57,376
32,813
52,006
84,820
2020E
190,620
96,059
113,411
-9,087
-39,386
-13,024
338,593
-158,629
13,024
-145,605
1,270
-96,059
-59,367
-154,156
38,832
84,820
123,651
-148,385
200
-14,745
-25,486
186,876
161,390
-33,513
1,252
-35,206
-104,021
161,390
57,369
21 August 2016
7

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NTPC
Disclosure of Interest Statement
Analyst ownership of the stock
NTPC
No
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investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following
representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations
as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative
products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this
information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
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