4QFY2011 Result Update | Power

May 17, 2011

NTPC
Performance Highlights
Y/E March (` cr) Net sales Operating profit OPM (%) Adj. net profit 4QFY2011 15,519 4,279 26.8 2,799 3QFY2011 % chg qoq 4QFY2010 13,421 4,300 30.8 2,319 15.6 (0.5) (402)bp 20.7 12,353 3,044 23.9 2,315 % chg yoy 25.6 40.6 285bp 20.9

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Power 140,956 0.7 222/169 297539 10 18,137 5,439 NTPC.BO NATP@IN

`171 `202
12 Months

Source: Company, Angel Research

For 4QFY2011, on a standalone basis NTPC reported a 20.9% yoy increase in adjusted net profit to `2,799cr. Bottom-line growth was aided by grossing up of RoE under the corporate tax rate for FY2011 (impact of `724cr) instead of the grossing up its RoE under MAT rate during 9MFY2011. However, for FY2011 as a whole, adjusted net profit was higher only by a marginal 5.4%. We maintain our Buy recommendation on the stock. Top-line growth at 25.6% yoy: NTPCs 4QFY2011 top line rose by 25.6% yoy to `15,519cr, aided by higher realisations due to higher fuel cost and grossing up under corporate tax rate (~34%). The company resorted to grossing up under corporate tax rate since it commercialised only ~1,000MW during FY2011 as against the earlier targeted ~3,000MW. ESO was lower by 1.3% during the quarter on account of low generation due to grid restriction and backing down by SEBs. However, the company maintained healthy PAF for the quarter (~96%) and for FY2011 (91%) as a whole, which enabled it to earn incentives. NTPCs OPM for the quarter rose by 285bp on a yoy basis to 26.8%. Outlook and valuation: NTPC has signed cumulative PPAs for 1,00,000MW, the payment for which is guaranteed under tripartite agreement till FY2016 and on the basis of first charge thereafter. NTPC is well placed in terms of fuel security due to the preference it gets in domestic coal supply and ability to pass through hike in fuel costs. Going ahead, NTPCs growth will depend on the pace of capacity addition. We expect the company to register CAGR of 10.8% and 8.8% in its top line and bottom line over FY201113E. At the CMP of `171, the stock is trading at 1.9x FY2012E and 1.7x FY2013E P/BV. We maintain our Buy recommendation on the stock with a target price of `202.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 84.5 9.8 3.6 2.1

Abs. (%) Sensex NTPC

3m (2.0)

1yr 7.7

3yr 4.0 (10.5)

(5.2) (16.2)

Key financials (Consolidated)

Y/E March (` cr) Net revenue % chg Net profit % chg OPM (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 48,231 9.0 8,838 9.2 27.1 10.7 15.9 2.2 14.2 9.8 3.3 12.0

FY2011E 59,134 22.6 9,353 5.8 25.1 11.3 15.1 2.0 14.0 10.6 2.8 11.2

FY2012E 64,696 9.4 10,116 8.2 25.4 12.3 13.9 1.9 13.9 10.4 2.6 10.3

FY2013E 72,586 12.2 11,063 9.4 25.4 13.4 12.7 1.7 13.9 10.3 2.5 9.8 V Srinivasan
022-39357800 Ext: 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

NTPC | 4QFY2011 Result Update

Exhibit 1: 4QFY2011 performance (Standalone)

Y/E March (` cr) Net Sales Other Operating Income Total Operating Income Fuel Cost (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`)
Source: Company, Angel Research

4QFY2011 15,519 461 15,980 9,726 63 708 5 1,266 8 11,700 4,279 26.8 530 698 206 3,257 3,257 21 475 14.6 2,782 18 8,245

3QFY2011 13,421 543 13,964 8,339 62 689 5 636 5 9,664 4,300 30.8 493 599 202 3,411 3,411 25 1,039 30 2,371 18 8,245

% chg 15.6 (15.1) 14.4 16.6 2.9 99.0 21.1 (0.5) (402) 7.5 16.6 1.7 (4.5) (4.5) (54.3) 17.3

4QFY2010 12,353 365 12,718 8,346 68 746 6 582 5 9,674 3,044 23.9 482 732 250 2,079 2,079 17 62 3 2,018 16 8,246

% chg 25.6 26.3 25.6 16.5 (5.0) 117.4 20.9 40.6 285 10.0 (4.6) (17.6) 56.6 56.6 668.7 37.9

FY2011 54,874 3,486 58,360 35,374 64 2,790 5 4,400 8 42,563 15,796 28.8 2,149 2,486 888 12,050 12,050 22 2,947 24 9,103 17 8,245

FY2010 46,323 1,882 48,205 29,463 64 2,412 5 2,011 4 33,886 14,319 30.9 1,809 2,650 1,025 10,885 10,885 23 2,157 20 8,728 19 8,245

% chg 18.5 85.2 21.1 20.1 15.6 118.8 25.6 10.3 (213) 18.8 (6.2) (13.4) 10.7 10.7 36.6 4.3

Exhibit 2: 4QFY2011 Actual vs. Angel estimates

(` cr)
Net sales Operating profit OPM (%) Adj. net profit
Source: Company, Angel Research

Actual
15,519 4,279 26.8 2,799

Estimates
13,835 3,785 27.4 2,216

Variation (%)
12.2 13.1 (58)bp 26.3

May 17, 2011

NTPC | 4QFY2011 Result Update

Exhibit 3: Details of one-off Items in 4QFY2011

Reported PAT Prior Period sales Prior Period adjustments Deferred tax for current year Deferred tax for previous year AAD write back MAT RLDC charges Provision for tariff arrangement Additional water charges Others Adjusted PAT
Source: Company, Angel Research

2,782 (165) (151) 213 394 13 (724) 98 264 43 32 2,799

Operational highlights
During the quarter, the companys generation volume was down by 1.08% yoy to 57.9U (58.5BU), while ESO fell by 1.3% yoy to 54.2BU (55.0BU). For FY2011 as a whole as well, generation and ESO were marginally higher by 0.77% and 0.73%, respectively. The decline in generation and ESO is on
account of multiple factors such as grid restriction, backing down by SEBs and planned outages. However, PAF of both the coal and gas-based stations remained at healthy levels, which enabled the company to earn efficiency incentives. The companys PAF for FY2011 as a whole stood at 91.67%, up 46bp yoy. During 4QFY2011, PAF of coal-based plants stood at 96.4%, while PAF of gas-based plants stood at 96.87%.

Exhibit 4: Operational performance

250 200 150 94 90 86 82 78 74 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

(BU)

100 50 0

Generation
Source: Company, Angel Research

PLF (RHS)

May 17, 2011

(%)

NTPC | 4QFY2011 Result Update

Fuel supply
As per management, NTPCs plants are not suffering on account of coal shortage. During FY2011, the company received 137.2mn tonnes (mt) of coal, of which 126.6mt (129.9mt in FY2010) was domestic, while 10.56mt (6.3mt) was imported. The reduction in the consumption of domestic coal was offset by higher consumption of imported coal, resulting in higher blending at 7.8%. NTPC intends to import 15.4mt of coal during FY2012. Management indicated that it can blend up to 20% and that cost of generation will be higher by 3040paise for every 10% increase in blending. The company also received 13.77mmscmd of gas in FY2011 as against 13.88mmscmd in FY2010.

Capacity addition
NTPC along with its JVs currently has 34,194MW capacity and 14,748MW is under construction. In FY2011, the company added 2,490MW of capacity, while 1,000MW was declared commercial. Management has indicated that the company would add 4,320MW of capacity in FY2012. The total capital outlay for NTPC (standalone) and NTPC Group (along with JVs) stands at `26,400cr and `30,844cr, respectively. The company has invited bids for 16,192MW, including 5,940MW under bulk tendering, which is in the finalisation stage.

Exhibit 5: Capacity addition (FY2012)

Project Sipat Stage-I Jhajjar Vallur Simhadri, StageII Mouda, Stage-I Total
Source: Company, Angel Research

(MW) 1,320 1,000 1,000 500 500 4,320

Cancellation of coal block allocation A setback

Recently the Ministry of Coal had de-allocated five captive coal blocks with cumulated geographical reserves of 3bn tonnes allotted to NTPC. The five blocks, which have been de-allocated, are Chatti Bariatu, Chatti Bariatu South, Kerandari, Brahmani and Chichiry Pastimal. The cancellation, if not revoked, will be a setback for NTPC, as the company will have to obtain coal linkages or import coal to meet demand. Management during the conference call indicated that it is contesting the de-allocation and that it has spent close to `500cr on the development of these mines. Management also indicated that the development work is progressing well in Pakri Barwadih and 1,993 acres of land has been acquired. The production from these mines is expected to begin by December 2012. NTPC has production target of 33.5mt in FY2013, which is expected to be ramped up to 15mt from FY2015. In all, the company expects to use 47mt of captive coal by FY2017.

May 17, 2011

NTPC | 4QFY2011 Result Update

Investment arguments
Capacity addition to drive future growth: NTPCs future growth is expected to be driven by the huge capacity addition planned by the company. NTPC Group currently has 34,194MW of capacity and 14,748MW is under construction. The company expects to add 4,320MW capacity in FY2012E and another ~5,000MW is expected to be commissioned in FY2013E. Earnings protected by the regulated return model: NTPC, being a central public utility (CPU), is governed by the regulated return model. The CERCs regulations for FY201014 provide a RoE of 15.5% on the regulated equity. As per the regulations, fuel costs are a pass-through, which protects the company from cost pressures due to increased fuel costs. NTPC has 85% of its overall output tied up under the long-term PPA route (regulated returns), which ensures power offtake and stable cash flows thereof.

Outlook and valuation

NTPC has signed cumulative PPAs for 1,00,000MW, the payment for which is guaranteed under tripartite agreement till FY2016 and on the basis of first charge thereafter. NTPC is well placed in terms of fuel security due to the preference it gets in domestic coal supply and has the ability to pass through hike in fuel costs. Going ahead, NTPCs growth will depend on the pace of capacity addition. We expect the company to register CAGR of 10.8% and 8.8% in its top line and bottom line over FY201113E. At the CMP of `171, the stock is trading at 1.9x FY2012E and 1.7x FY2013E P/BV. We maintain our Buy recommendation on the stock with a target price of `202.

Exhibit 6: EPS Angel estimates vs. Bloomberg consensus

Year/(`) FY2012E FY2013E
Source: Angel Research, Bloomberg

Angel Est. 12.3 13.4

Bloomberg Consensus 12.0 13.4

Var (%) over consensus 2.5 -

Exhibit 7: Recommendation summary

Company Reco. CMP (`) Tgt. price (`) Upside (%) FY13E P/BV (x) FY13E P/E (x) FY2011-13E EPS CAGR (%) FY13E RoCE (%) FY13E RoE (%)

CESC GIPCL NTPC

Source: Angel Research

Buy Buy Buy

275 81 171

380 107 202

38.1 31.4 18.0

0.7 0.8 1.7

6.2 6.5 12.7

7.1 36.1 8.8

9.0 11.2 10.3

11.2 12.4 13.9

May 17, 2011

NTPC | 4QFY2011 Result Update

Exhibit 8: One-year forward P/BV

310 260
(Share Price `)

210 160 110 60 Apr-06 Apr-07 Price Apr-08 1.5X 2X Apr-09 2.5X Apr-10 3X Apr-11

Source: Company, Angel Research

Exhibit 9: Premium/Discount to Sensex P/E

100 80 60

(%)

40 20 0 (20) (40) Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

Prem/Disc to Sensex

Historic Avg Premium

Source: Company, Angel Research

May 17, 2011

NTPC | 4QFY2011 Result Update

Profit and loss statement (Consolidated)

Y/E March (` cr) Total Operating Income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income Share in profit of Associates Recurring PBT Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Less Minority Interest PAT After Minority Interest % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 38,635 14.0 27,222 22,219 3,050 1,953 11,413 12.9 29.5 2,206 9,207 14.9 24 1,858 3,002 10,351 10,351 2,881 27.8 7,470 7,470 8.1 19.3 9.1 9.1 8.1 44,245 14.5 33,702 27,347 3,823 2,533 10,544 (7.6) 23.8 2,495 8,049 (12.6) 18 2,144 3,402 9,307 9,307 1,215 13.1 8,092 8,092 8.3 18.3 9.8 9.8 8.3 48,231 9.0 35,156 30,188 2,446 2,523 13,075 24.0 27.1 2,894 10,180 26.5 21 2,078 2,947 11,049 11,049 2,211 20.0 8,838 (0.0) 8,838 9.2 18.3 10.7 10.7 9.2 59,134 22.6 44,302 36,414 4,965 2,922 14,833 13.4 25.1 2,720 12,113 19.0 20 2,493 2,772 12,392 12,392 3,044 24.6 9,348 (5.2) 9,353 5.8 15.8 11.3 11.3 5.8 64,696 9.4 48,274 40,033 5,044 3,197 16,422 10.7 25.4 3,402 13,020 7.5 20 2,437 2,821 13,403 13,403 3,292 24.6 10,111 (5.2) 10,116 8.2 15.6 12.3 12.3 8.2 72,586 12 54,125 45,061 5,659 3,406 18,461 12 25.4 4,192 14,269 10 20 2,808 2,912 14,373 14,373 3,315 23 11,058 (5) 11,063 9.4 15 13.4 13.4 9.4

May 17, 2011

NTPC | 4QFY2011 Result Update

Balance sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Others Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 55,648 64,741 27,487 29,776 28,161 34,966 25,630 30,929 1 13,447 11,696 26,346 33,486 15,361 17,250 5,031 5,954 9,006 7,230 71,527 32,723 38,804 37,682 1 11,778 33,215 16,053 6,549 10,614 12,908 20,307 20 77,479 35,442 42,037 47,682 1 8,357 38,045 17,859 7,875 12,311 15,274 22,770 96,919 119,419 38,844 58,075 40,242 1 7,357 39,961 17,574 8,615 13,772 16,844 23,117 43,036 76,383 39,742 1 6,357 42,448 17,258 9,739 15,451 17,497 24,951 8,246 8,246 8,246 55,993 64,239 279 43,844 230 8,246 61,053 69,298 485 50,392 672 8,246 67,497 75,743 485 51,892 672 8,246 74,889 83,135 485 63,142 672 45,991 51,706 54,236 59,951 124 0 166 0 30,315 38,823 FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

84,675 98,940 108,592 120,847 128,792 147,434

8,908 12,137 17,438 21,349 -

84,675 98,940 108,592 120,847 128,792 147,434

May 17, 2011

NTPC | 4QFY2011 Result Update

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Chg in WC & other adj. Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2008 10,351 2,206 (134) 3,002 2,657 6,764 1,696 3,002 (5,010) 3,295 3,387 (92) 1,662 13,698 15,361 FY2009 9,307 2,495 (2,782) 3,402 2,566 3,052 1,751 3,402 8,508 3,478 5,030 1,890 15,361 17,251 FY2010 FY2011E FY2012E FY2013E 11,049 2,894 408 2,947 2,799 8,606 (82) 2,947 5,022 3,682 1,340 (1,198) 17,250 16,053 12,392 2,720 (612) 2,772 3,044 8,684 3,420 2,772 (9,760) 6,548 3,666 2,882 1,806 16,053 17,859
13,403 3,402 (632) 2,821 3,292 10,060 (12,000) 1,000 2,821 (8,179) 1,500 3,666 (2,166) (285) 17,859 17,574 14,373 4,192 (2,150) 2,912 3,315 10,188 (22,000) 1,000 2,912 (18,088) 11,250 3,666 7,584 (316) 17,574 17,258

(9,708) (11,344) (14,009) (15,952)

(6,192) (11,144)

May 17, 2011

NTPC | 4QFY2011 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 0.3 1.3 5.0 0.4 2.0 3.8 0.4 2.1 4.9 0.5 2.2 4.9 0.7 2.1 5.3 0.7 2.5 5.1 0.7 26 22 137 17 0.7 26 29 114 25 0.7 26 41 130 32 0.8 23 48 116 28 0.7 24 50 121 29 0.7 19 39 116 33 11.4 21.5 14.4 8.8 17.1 14.2 9.8 19.3 14.2 10.6 22.1 14.0 10.4 20.7 13.9 10.3 17.7 13.9 23.8 72.2 0.6 10.1 4.7 0.3 11.6 18.2 86.9 0.6 9.3 5.4 0.3 10.5 21.1 80.0 0.6 9.4 4.0 0.4 11.5 20.5 75.4 0.6 9.4 4.0 0.4 11.8 20.1 75.4 0.6 9.2 3.6 0.5 11.8 19.7 76.9 0.6 9.1 3.8 0.5 11.8 9.1 9.1 11.7 4.1 65.8 9.8 9.8 12.8 4.2 72.7 10.7 10.7 14.2 4.5 77.9 11.3 11.3 14.6 4.4 84.0 12.3 12.3 16.4 4.4 91.9 13.4 13.4 18.5 4.4 100.8
18.9 14.6 2.6 2.4 3.7 12.5 1.7 17.4 13.3 2.4 2.5 3.4 14.3 1.5

FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E 15.9 12.0 2.2 2.6 3.3 12.0 1.4 15.1 11.7 2.0 2.6 2.8 11.2 1.4 13.9 10.4 1.9 2.6 2.6 10.3 1.3 12.7 9.2 1.7 2.6 2.5 9.8 1.2

May 17, 2011

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NTPC | 4QFY2011 Result Update

Research Team Tel: 022 - 3935 7800 DISCLAIMER

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

NTPC No Yes No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

May 17, 2011

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