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.