ICICI Direct recommended hold rating on NTPC with a target price of Rs 147 in its research report dated January 31, 2019.
ICICI Direct's research report on NTPC
NTPC reported a decent set of Q3FY19 numbers wherein generation was in line with estimates coupled with higher-than-expected revenues (on account of higher realisations) and EBITDA (lower employee & other expenses). Accentuation of under recovery of fixed costs was pegged at Rs 1108 crore (YTDFY19), which was on account of lower PAF and unviability of coal at a few plants Reported revenues came in at Rs 24120.4 crore vs. estimate of Rs 22299.5 crore. The revenue beat mainly came in from higher-than-expected realisation at Rs 3.65/Kwhr. However, on an operational basis, gross generation grew 3.4% at ~70 billion units (BUs) vs. estimate of 71.2 BUs whereas energy sold grew 3.1% YoY to 65.3 BUs vs. our estimate of 66.5 BUs. PLFs of coal plants were at 77.7% vs. 76.9% in Q3FY18. As of 9MFY19, the company’s commercial capacity was at 44185 MW. Average tariff for 9MFY19 was at Rs 3.47/Kwhr.
Outlook
This coupled with a strong balance sheet profile will be negated with limited upside in multiples given thermal power as a segment faces long term visibility challenges in the wake of rising tide of renewables. Hence, we continue to value the company ay 1.1x FY20E book value and continue to ascribe a fair value of Rs 147 per share.
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