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NTPC Ltd (updated - 28 May 2009)
For the March 2009 quarter, better realisations as well as a rise in volumes helped NTPC report 9 per cent y-o-y growth in sales. However, higher fuel expenses and a surge in employee costs dented operating profits, which fell 8.4 per cent. As a result, its operating profit margin was down around 470 basis points to 24.5 per cent.
One-time exceptional items, including a tax refund, helped NTPC’s net profit rise 58 per cent in the March 2009 quarter. But if these items were removed, net profit would have been lower than in the March 2008 quarter.

Last year, the company commissioned 1,000 Mw of new power generation capacity, which was way short of its target of 2,800 Mw. NTPC is now targeting 3,300 Mw new power generation capacity in 2009-10. But analysts are not convinced and except a little over half the targeted capacity to come up. They also expect NTPC to miss its capacity addition target of 22,400 Mw in the 11th Five-Year Plan.

The inability to meet targets is consequent to project delays, which are partly on account of slippages in equipment supply and non-availability of adequate fuel. For 2009-10, analysts are expecting NTPC’s revenue and net profit to grow about 10 per cent, resulting in an EPS (earning per share) of Rs 10.5 per share and an estimated book value of Rs 76.5.

After its March 2009 quarter results, most analysts have scaled down their stock price targets for NTPC due to concerns over higher valuations and potential delays in capacity addition. At current levels of Rs 202, analysts believe the stock is expensive at 2.6 times its estimated 2009-10 book value. They expect the stock to underperform the broader markets.
source - businessstandard

NTPC Ltd (updated - Mar 2009)

Over the past year the NTPC stock has outperformed the Sensex by a wide margin losing just 13 per cent. Since the end of January though, the stock, which has the third highest weightage in the Nifty, has lost 10 per cent and at Rs 171, trades at between 16-18 times estimated 2009-10 earnings. Both the company’s growth and visibility of earnings appear to be adequately priced into the valuations.

In fact, there are some misgivings about the tardy pace at which India’s biggest power generator is adding capacity. The Rs 38,682 crore NTPC, which produces more than a fourth of the nation’s power, had plans to add 2820 MW to its existing 28 GW by 2008-09. However, only 1,250 MW of this has come up and another 250 mw is expected by March 2009 in Bhilai. Analysts feel the planned addition of 22 GW in the eleventh plan may not come through.

That’s one reason the revenue forecasts for 200910 range anywhere between a growth of 5 per cent and 15 per cent. NTPC posted a compounded annual growth in net sales of 18 per cent in the three years to 2008 while net profits grew at a compounded 8.5 per cent. As of now it’s unlikely those numbers will be repeated, especially if capacity isn’t added quickly and earnings are tipped to grow by sub-10 per cent in each of the next two years.

Also, NTPC’s plant load factor (plf) suffered in the first half of 2008-09 because of the lack of fuel. However, that issue was sorted out in the December 2008 quarter when revenues rose 20 per cent y-o-y led by additional generation as also higher fuel costs that were passed on to customers. That however, couldn’t offset the higher provisions for employee costs and the operating profit margin fell 330 basis points y-o-y to 28.5 per cent.
source - businessstandard

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NTPC Ltd (updated - 09 April 2009)
National Thermal Power Corporation (NTPC)’s provisional results for the year to March 2009 are somewhat disappointing with the profit after tax up ashade under 6 per cent at Rs 7,827.4 crore. The Street was expecting a number closer to Rs 8,000 crore. Surprisingly, however, the stock jumped nearly 7 per cent on Wednesday to close at Rs 196.75, possibly because the net profit number included some extraordinary items. Otherwise, the stock has done very little in the recent rally that started from March 9, 2009 and till Wednesday, had gained just under 5 per cent compared with a move of 29 per cent for the Sensex. With NTPC expected to commission around 3,300 MWin the current year, analysts are now pencilling in consolidated revenues of around Rs 51,000 crore while the consolidated net profit expected to come in is about Rs 8,700 crore. The return on equity (ROE) for the company, in 2009-10, is estimated at about 14-15 per cent, slightly higher than the level estimated for the year gone by.

The ROE should ideally have been higher, given that the base ROEhas been increased to 15.5 per cent, except for the fact that some of NTPC’s equity capital is being deployed in projects that are under way. Moreover, the company is also sitting on 8.5 per cent tax-free bonds that were issued some time back to state electricity boards in lieu of receivables. The stock was agood defensive play in a bear market and has performed reasonably well over the past year. However, with investors looking for growth stories now, NTPC is expected to perform in line with the market. At current levels, the stock trades at an EV/ebitda (enterprise value/earnings before interest, tax and depreciation) of close to 13 times, which is somewhat expensive. Also, with the Nifty turning into a freefloat market capitalisation index, NTPC’s weightage will fall sharply from about 8per cent at present.
source - businessstandard

NTPC Ltd (updated - 11 June 2009)
The NTPC management claims the company will add the targeted 22,000 MW capacity in the 11th Plan period (2008-2012). However, industry watchers believe that a only little over 15,000 MW will be added; some say it could be far lower at just 13,000 MW. In the first two years of the Plan period, the public sector power generation firm managed just 3,750 MW. This year, it hopes to add 3,300 MW.

The delays are not always the company’s fault because acquiring land is a time-consuming process and suppliers often send equipment late. Nevertheless, it appears that NTPC’s capital expenditure plans are moving at a rather slow pace.

Brokerage Motilal Oswal points out that for about 75 per cent of the 17,400 MW capacity that is being set up currently, the spends are less than 50 per cent of what were planned.
There are also a few concerns related to existing plants, mainly availability of coal, though the management brushes these aside saying the company will continue to import coal when domestic supplies fall short of its needs. NTPC’s captive coal mining project has been delayed somewhat, though that again is a minor issue. What’s really of concern is that unless the company executes projects efficiently, it will end up blocking cash, which will earn it zero returns.

The slow pace of capacity addition, falling interest income, say analysts, will result in NTPC’s earnings growing at a compounded 5.6 per cent between 2008-2010 and at a slightly accelerated 9.5 per cent between 20102012. That is despite the fact that new tariff regulations will help NTPC -the return on equity has been upped to 15.5 per cent from 14 per cent.
At Rs 220, the stock trades at nearly 21 times estimated 2009-10 earnings and about 17.5 times 201011 earnings and is way too expensive to justify the expected earnings growth. Also, what will make the NTPC stock less attractive is that it will enjoy a much lower weight - down about 500 basis points - once the Nifty becomes a free-float index later this month.
source - BS