28 June 2020
4QFY20 Results Update | Sector: Utilities
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TP: INR145 (+49%)
Adj. PAT benefits from FC recoveries
FC recoveries flow in; Reported PAT impacted by tax-related one-offs
NTPC’s results highlight the impact of several one-offs, largely on the tax
front. Adj. for these one-offs, though, numbers reflect the benefit of fixed
cost (F/C) recoveries and strong other income. We expect FC under-
recoveries (u/r) to remain low on better coal availability.
Commercialization at 5.3GW in FY20 marked an all-time high for the
company. A pickup in capitalization, along with lower F/C u/r, should drive a
10% earnings CAGR over FY20–23. Maintain
with TP of INR145/sh.
Adj. profits benefit from FC recoveries and other income
Adj. for one-offs and FC u/r, NTPC's S/A PAT came in at INR33.0b (4% up YoY
and 8% higher than our est. of INR30.4b). The beat on our estimate was
partly led by higher-than-expected other income (adj. other income at
INR6.8b v/s our est. of INR6b). Other income was aided by late payment
surcharge of INR3.9b. Fixed cost recoveries stood at INR1.3b.
Reported PAT, however, came in at INR12.5b (down 71% YoY) given the
numerous one-offs. Among them were: a) INR8.9b net impact on tax under
the Vivad se Vishwas scheme and b) INR8b impact on account of adj. for
RRA and MAT credit. For FY20, adj. S/A profit (incl. FC u/r) grew 15% YoY to
INR121b v/s INR106b in FY19. FY20 S/A CFO stood at INR220b while the
company declared a total dividend of INR3.15/sh for FY20.
Profit from JVs was lower at INR0.5b v/s INR0.8b in 4Q. Overall, FY20 JV
profit declined to INR4b in FY20 v/s INR6.7b in FY19 on account of losses at
Meja (losses >INR3b for FY20).
Management commentary: Commercialization target of ~5.9GW for FY21
NTPC expects capitalization momentum to continue and targets ~5.9GW for
commercialization in FY21. However, the company has witnessed issues
related to manpower deployment, which could hamper execution. The
company is confident of achieving at least 4.5GW in FY21. It has set a
commercialization target of 5.7GW for FY22.
The co. further plans to increase its footprint in the Renewable space.
~2.3GW solar projects are under implementation for the co., and it has
awarded ~2.1GW projects on an EPC basis.
Overdues for the company have risen and currently stand at INR180b v/s
INR96b at the end of FY20.
Capitalization gains pace, under-recoveries decline; Reiterate Buy
NTPC commercialized 5.3GW of capacities for FY20 – the highest ever in a
single fiscal year – and is guiding for ~5.9GW to be capitalized in FY21.
Capitalization has picked up pace and would drive a regulated equity CAGR of
12% over FY20–23E and boost RoE (+120bps accretion). Furthermore, muted
power demand, coupled with production ramp-up at Coal India’s mines, has
led to an increase in coal stocks at power plants and improved plant
availability factors. Thus, FC u/r should remain low. Maintain Buy, with a DCF
based target price of INR145/sh.
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
960.3 / 12.6
146 / 74
Financials & Valuations (INR b)
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
Shareholding pattern (%)
Mar-20 Dec-19 Mar-19
FII Includes depository receipts
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com); +91 22 6129 1572
13 February 2020
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.