NTPC Ltd.Q2FY Result Update

1. NTPC Ltd.
Electric Utilities
BUY
Relative Capital Market Strength
NTPC Ltd. (NTPC), reported a mixed set of numbers for Q2 FY16 quarter. The
company reported a top-line of Rs. 178,985.1mn, which was in-line to our
expectation. EBITDA too came in-line with our expectation. However, lower
other income and tax income of Rs. 7,296.8mn (in contrast to our expectation
of a tax expenses of Rs. 1,176mn) led to a bottom-line of Rs. 28,982.8mn,
which was significantly above our expectation.
Q2 FY16 Result Analysis:
Higher power generation led to a rise in top-line: Higher commercial power
generation capacity coupled with expansion in the plant load factor (PLF) level,
led to a 6.9% Y-o-Y rise in total operating income to Rs. 178,985.1mn. Over a
year (i.e. between Q2 FY15 to Q2 FY16), NTPC’s commercial generation
capacity increased by 4.7% Y-o-Y to 43,943MW. At the same time, with an
improving economic scenario, the company witnessed over 4ppts rise in the
PLF to 77.3%. As a result, power sales volume increased by 8.6% Y-o-Y to
55.9bn units. However, the positive impact of increased sales volume was
partially offset by lower power sales realization, which declined by 0.9% Y-o-Y
to Rs. 3.3 per unit. Sequentially, top-line increased by 4.8%.
Lower fuel cost led to an expansion in EBITDA margin: On the back of lower
fuel cost, total operating expenditure increased at a lower rate (+2.8% Y-o-Y) as
compared to the top-line growth rate. Consequently, as a percent of total
operating income, operating expenditure stood at 77.5% in Q2 FY16 as
compared to 80.6% in the same quarter of the previous year. Thus, EBITDA
increased by 24.3% Y-o-Y to Rs. 40,306.5mn, with 315bps Y-o-Y expansion in
the margin. Sequentially, EBITDA increased by 17.2%, while margin expanded
by 240bps.
Higher tax credit rocketed bottom-line: With capacity expansion over a year,
depreciation charge and interest expenses increased by 14.9% and 22% Y-o-Y.
Moreover, other income declined by 48.1% Y-o-Y, mainly due to redemption of
bonds and reduction in investment levels. As a result, profit before tax
increased by 11% Y-o-Y. The company reported a tax credit of Rs. 7,296.8mn in
Q2 FY16 as compared to Rs. 1,176mn in Q2 FY15. Accordingly, bottom-line
increased by 39.9% Y-o-Y to Rs. 28,982.8mn, with 382bps expansion in the PAT
margin. Sequentially, bottom-line increased by 35.7%.
Valuation: NTPC is likely to benefit from the revival in domestic economy,
which in turn is expected to increase the demand of power. We anticipate, the
company to report an expansion in the PLF levels, thereby driving the top-line
growth. On operating cost front, NTPC is likely to benefit from the lower fuel
cost and usage of captive coal. At CMP of Rs. 135, NTPC is trading at a P/E
multiple of 12.3x and 9.6x to its FY16E and FY17E earnings, respectively, which
we feel is inexpensive taking into consideration its project addition schedule,
profitability and RoE of 10-13%. Based on a P/E multiple of 12x to its FY17E
earnings, we arrive at a target price of Rs. 169 per share, reflecting a return of
26%. Thus we reiterate our “BUY” recommendation on the stock.
Q2 FY16 Snapshot:
Rajnath Yadav | Board line: +91 22 6707 9999; Ext. 975 | rajnath.yadav@choiceindia.com
1
Nov. 07, 2015
Rating Matrix
CMP (Rs.) 135
Rating Buy
Target price (Rs.) 169
Target period 12 months
Upside potential 25.3%
52 week H/L (Rs.) 164.7 / 107.2
Face value (Rs.) 10
Category Large Cap
Sector Electric Utilities
Shareholding Pattern as on 30th Sept. 2015
Particulars Sept-15 Jun-15 Mar-15 Sep-14
Promoters 75.0% 75.0% 75.0% 75.0%
FIIs 9.2% 10.0% 10.3% 10.4%
DIIs 13.5% 12.7% 12.3% 12.1%
Non institutions 2.3% 2.3% 2.4% 2.5%
Q2 FY16 Result Update
Financial Snapshot (Rs. bn)
Projections FY12 FY13 FY14 FY15 FY16E FY17E
Revenue 621 657 720 732 730 854
EBITDA 140 171 178 161 176 213
Adjusted PAT 92 109 110 103 91 116
EBITDA (%) 22.6% 26.0% 24.7% 22.0% 24.1% 25.0%
PAT (%) 14.9% 16.6% 15.2% 14.0% 12.5% 13.6%
EPS 11 13 13 12 11 14
BVPS 89 97 104 99 108 118
RONW (%) 13.1% 14.2% 13.2% 12.3% 10.7% 12.5%
P/E 12.3 9.6
P / BVPS 1.3 1.1
Source: Choice Broking Research, Company
75
80
85
90
95
100
105
110
115
07-Nov-14
07-Dec-14
07-Jan-15
07-Feb-15
07-Mar-15
07-Apr-15
07-May-15
07-Jun-15
07-Jul-15
07-Aug-15
07-Sep-15
07-Oct-15
NTPC Ltd. Sensex
Particular (Rs. mn) Q2 FY16 Q1 FY16 Q2 FY15 Q-o-Q (%) Y-o-Y (%)
Total Operating Revenue 178,985.1 170,845.8 167,366.3 4.8% 6.9%
EBITDA 40,306.5 34,376.7 32,423.3 17.2% 24.3%
Reported PAT 28,982.8 21,353.5 20,716.3 35.7% 39.9%
EBITDA Margin (%) 22.5% 20.1% 19.4% 240 bps 315 bps
PAT Margin (%) 16.2% 12.5% 12.4% 369 bps 382 bps

2. BUY
2
Q2 FY16 Quarter Performance:
Source: Choice Broking Research, Company
Q2 FY16 Segmental Details:
Source: Choice Broking Research, Company
NTPC Ltd.
Electric Utilities
Nov. 07, 2015
Q2 FY16 Result Update
Particulars (Rs. mn) Q2 FY16 Q1 FY16 Q2 FY15 Q-o-Q (%) Y-o-Y (%)
Total Operating Income 178,985.1 170,845.8 167,366.3 4.8% 6.9%
Total Operating Expenditure (138,678.6) (136,469.1) (134,943.0) 1.6% 2.8%
EBITDA 40,306.5 34,376.7 32,423.3 17.2% 24.3%
Depreciation (13,229.1) (12,379.5) (11,515.8) 6.9% 14.9%
EBIT 27,077.4 21,997.2 20,907.5 23.1% 29.5%
Interest Expenses (8,145.3) (7,308.8) (6,674.1) 11.4% 22.0%
Other Income 2,753.9 2,387.2 5,306.9 15.4% -48.1%
Profit Before Tax (PBT) 21,686.0 17,075.6 19,540.3 27.0% 11.0%
Tax Expenses 7,296.8 4,277.9 1,176.0 70.6% 520.5%
Adjusted PAT 28,982.8 21,353.5 20,716.3 35.7% 39.9%
Basic EPS (Rs.) 3.5 2.6 2.5 35.5% 39.8%
Diluted EPS (Rs.) 3.5 2.6 2.5 35.5% 39.8%
EBITDA Margin (%) 22.5% 20.1% 19.4% 240 bps 315 bps
Reported PAT Margin (%) 16.2% 12.5% 12.4% 369 bps 382 bps
Q2 FY16 Q1 FY16 Q2 FY15 Q-o-Q (%) Y-o-Y (%)
Segmental Revenue (Rs. mn)
Generation 179,502.8 171,173.1 167,828.7 4.9% 7.0%
Others 270.1 237.1 228.6 13.9% 18.2%
Total Revenue 179,772.9 171,410.2 168,057.3 4.9% 7.0%
Segmental EBIT Break-up (Rs. mn)
Generation 31,093.0 25,249.6 24,240.5 23.1% 28.3%
Others (270.2) (20.7) 36.7 1205.3% -836.2%
Total EBIT 30,822.8 25,228.9 24,277.2 22.2% 27.0%

3. BUY
3
Q1 FY16 Other Operating Parameters:
Source: Choice Broking Research, Company
NTPC Ltd.
Electric Utilities
Nov. 07, 2015
Q2 FY16 Result Update
Other Operating Parameters
Particular (Rs. mn) Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q-o-Q (%) Y-o-Y (%)
Group Installed Capacity (MW) 43,128 43,143 44,398 45,048 45,548 1.1% 5.6%
NTPC Commercial Capacity (MW) 36,467 37,142 37,142 37,142 37,942 2.2% 4.0%
Group Commercial Capacity (MW) 41,968 42,643 43,143 43,143 43,943 1.9% 4.7%
NTPC Coal PLF (%) 73.2% 80.8% 82.7% 77.6% 77.3% (31) bps 407 bps
NTPC Gas PLF (%) 33.4% 31.8% 26.7% 28.5% 25.7% (274) bps (765) bps
NTPC Coal PAF (%) 76.8% 91.0% 97.2% 91.6% 88.1% (352) bps 1,130 bps
NTPC Gas PAF (%) 89.1% 93.2% 96.5% 96.6% 97.6% 100 bps 851 bps
Gross Generation (mn Units) 55,421 61,310 61,313 58,696 60,159 2.5% 8.5%
Commercial Generation (mn Units) 55,252 61,139 61,313 58,482 59,847 2.3% 8.3%
Energy Sent Out (mn Units) 51,465 57,216 57,385 54,475 55,891 2.6% 8.6%
Domestic Coal Supply (mn tonnes) 33.92 39.61 41.06 38.39 34.62 -9.8% 2.1%
Imported Coal Supply (mn tonnes) 2.88 4.93 4.89 3.86 2.56 -33.7% -11.1%
Total Coal Consumption (mn tonnes) 36.80 44.54 45.95 42.25 37.18 -12.0% 1.0%
Gas Consumption (mmscmd) 6.68 6.12 5.62 5.88 5.13 -12.8% -23.2%
Average Tariff (Rs. per Unit) 3.32 3.26 3.34 3.26 3.29 0.9% -0.9%
Average Fuel Cost (Rs. Per unit) 2.22 2.12 2.18 2.11 2.06 -2.3% -7.1%
Regulated Equity (Rs. mn) 352,075 366,177 369,163 369,000 389,120 5.5% 10.5%
Conference Call Highlights:
• During the quarter, NTPC commercialized 800MW of its hydro power generation capacity and operated it at 83.3% PLF
level. Moreover, in Oct. 2015, the company commercialized 500MW generation capacity at Vindhyachal Super Thermal
Power Station. This thermal power plant is entitled to earn additional return on equity of 0.5% (i.e. 16%), as it was
synchronized and commissioned well before the commercial date of operations.
• In Sept. 2015, the company appointed M/s. Thriveni- Sainik JV as mine developer cum operator for Pakri Barwadih Coal
Mining Project for a period of 27 years. Peak annual production from the mine is likely to be 15mn tonnes. Commercial
mining operations is expected to start in current fiscal.
• Adjusted profit for the quarter increased by 24.2% Y-o-Y to Rs. 22,165.2mn as against Rs. 17844mn in Q2 FY15.
• Regulated equity during the quarter stood at Rs. 3,89,120mn. NTPC has raised the standalone capex guidance for FY16
from Rs. 230bn to Rs. 250bn.

4. 4
Financial Statement
Source: Choice Broking Research
Source: Choice Broking Research
BUYNTPC Ltd.
Electric Utilities
Profit and Loss Statement
Projections (Rs. mn) FY12 FY13 FY14 FY15 FY16E FY17E
Total Operating Income 620,522 656,916 720,193 732,461 729,972 853,692
Revenue Growth Rate (%) 9.0% 5.9% 9.6% 1.7% -0.3% 16.9%
Total Expenditure (480,124) (485,947) (542,275) (571,605) (554,122) (640,249)
EBITDA 140,399 170,969 177,918 160,856 175,851 213,442
EBITDA Growth Rate (%) 2.9% 21.8% 4.1% -9.6% 9.3% 21.4%
EBITDA Margin (%) 22.6% 26.0% 24.7% 22.0% 24.1% 25.0%
Depreciation (27,917) (33,968) (41,422) (49,117) (54,417) (61,787)
EBIT 112,482 137,001 136,496 111,740 121,434 151,656
Interest (17,116) (19,244) (24,066) (27,436) (29,432) (32,547)
Other Income 27,897 31,188 26,620 21,163 19,809 20,360
Exceptional Item 0 16,841 0 0 0 0
PBT 123,262 165,786 139,050 105,467 111,811 139,469
Income Tax Expenses (31,024) (39,592) (29,299) (2,558) (20,794) (23,061)
PAT 92,237 126,194 109,751 102,909 91,018 116,408
PAT Growth Rate (%) 1.3% 18.6% 0.4% -6.2% -11.6% 27.9%
PAT Margin (%) 14.9% 16.6% 15.2% 14.0% 12.5% 13.6%
Balance Sheet
Projections (Rs. mn) FY12 FY13 FY14 FY15 FY16E FY17E
Share Capital 82,455 82,455 82,455 82,455 82,455 82,455
Reserves And Surplus 650,457 721,421 775,699 734,119 804,203 893,837
Deferred Revenue 14,301 12,441 16,099 13,942 13,942 13,942
Long-Term Borrowings 459,083 532,537 624,058 785,323 820,470 869,711
Deferred Tax Liabilities (Net) 6,369 9,153 10,516 9,791 8,163 9,547
Other Long-Term Liabilities 17,291 19,698 25,125 28,866 28,866 28,866
Long-Term Provisions 6,037 7,399 8,794 11,157 8,512 9,955
Short-Term Borrowings 0 0 0 0 141,772 165,800
Trade Payables 44,607 51,324 64,296 59,532 37,747 44,385
Other Current Liabilities 95,372 104,693 115,476 168,076 122,522 143,287
Short-Term Provisions 32,337 70,045 73,026 77,588 76,392 89,340
Total Liabilities 1,408,307 1,611,165 1,795,542 1,970,847 2,145,042 2,351,124
Tangilble Assets 450,445 626,874 718,659 742,393 993,055 1,222,216
Intangible Assets 2,119 2,487 2,450 46,097 0 0
CWIP 418,278 371,094 448,867 564,935 488,447 410,844
Intangible Assets Under Development 0 0 19 0 0 0
Non-Current Investments 95,839 91,376 81,209 71,541 71,541 71,541
Long Term Loans And Advances 53,944 96,334 127,773 155,279 155,279 155,279
Other Non Current Assets 13,719 14,912 17,868 16,968 16,968 16,968
Current Investments 16,225 16,225 16,370 18,781 18,781 18,781
Inventories 37,029 40,572 53,734 74,530 69,997 77,183
Trade Receivables 58,325 53,650 52,201 76,044 77,997 86,539
Cash And Bank Balances 161,418 168,677 153,114 128,788 141,772 165,800
Short-Term Loans And Advances 15,433 17,456 31,160 24,076 24,076 24,076
Other Current Assets 85,534 111,508 92,120 51,416 87,131 101,898
Total Assets 1,408,307 1,611,165 1,795,542 1,970,847 2,145,042 2,351,124
Nov. 07, 2015
Q2 FY16 Result Update

5. 5
Financial Statement (Contd…)
Source: Choice Broking Research
Source: Choice Broking Research
BUYNTPC Ltd.
Electric Utilities
Cash Flow Statement
Projections (Rs. mn) FY12 FY13 FY14 FY15 FY16E FY17E
Profit Before Tax 123,262 165,786 139,050 105,467 111,811 139,469
Depreciation and Amortization 27,917 33,968 41,422 49,117 54,417 61,787
Other Adjustments (11,286) (9,875) 5,335 14,629 12,869 15,937
Change in Working Capital (22,071) (5,971) (2,919) (7,665) (105,942) 12,683
Income Tax Paid (10,723) (28,956) (25,563) (19,199) (20,794) (23,061)
Cash Flow from Operating Activities 107,099 154,952 157,325 142,347 52,362 206,815
CAPEX (107,944) (162,967) (167,397) (171,283) (182,493) (213,423)
Change in Investments 18,039 16,225 16,225 16,370 0 0
Others 11,100 6,573 11,375 9,287 16,563 16,563
Cash Flow from Investing Activities (78,805) (140,169) (139,797) (145,626) (165,930) (196,860)
Net Change in Borrowings 52,135 72,624 73,732 186,092 176,918 73,270
Interest Expenses (38,851) (38,315) (47,414) (55,863) (29,432) (32,547)
Dividend & Dividend Tax (41,146) (40,688) (57,881) (147,968) (20,934) (26,774)
Others (829) (1,146) (1,527) (1,042) 0 124
Cash Flow from Financing Activities (28,691) (7,524) (33,090) (18,781) 126,552 14,073
Net Cash Inflow / Outflow (398) 7,259 (15,562) (22,060) 12,984 24,028
Opening Cash & Cash Equivalents 161,853 161,418 168,677 153,114 128,788 141,772
Closing Cash & Cash Equivalent 161,455 168,677 153,115 131,054 141,772 165,800
Financial Ratios
Particulars FY12 FY13 FY14 FY15 FY16E FY17E
Profitability & Return Ratios
EBITDA Margin (%) 22.6% 26.0% 24.7% 22.0% 24.1% 25.0%
PAT Margin (%) 14.9% 16.6% 15.2% 14.0% 12.5% 13.6%
RONW (%) 13.1% 14.2% 13.2% 12.3% 10.7% 12.5%
RoCE (%) 9.6% 10.5% 9.3% 7.0% 6.8% 7.6%
Working Capital & Liquidity Ratios
Payables (Days) 26.6 29.1 32.8 29.9 29.1 29.5
Inventory (Days) 22.1 23.0 27.4 37.5 35.0 33.0
Receivables (Days) 34.8 30.4 26.6 38.2 39.0 37.0
Current Ratio (X) 2.1 1.7 1.5 1.2 1.7 1.6
Turnover & Leverage Ratios
Fixed Asset Turnover (X) 0.8 0.7 0.7 0.6 0.5 0.5
Total Asset Turnover (X) 0.5 0.4 0.4 0.4 0.4 0.4
Debt Equity Ratio (X) 0.6 0.7 0.7 1 1.1 1.1
Dividend Pay Out Ratio 38.4% 32.0% 45.1% 120.2% 20.0% 20.0%
DuPont Analysis 13.1% 16.4% 13.2% 12.3% 10.7% 12.5%
Tax Burden (PAT / PBT) 0.7 0.8 0.8 1.0 0.8 0.8
Interest Burden (PBT / PBIT) 1.1 1.2 1.0 0.9 0.9 0.9
EBIT Margin 18.1% 20.9% 19.0% 15.3 16.6% 17.8%
Total Asset Turnover Ratio (Net Sales / Total Asset) 0.5 0.4 0.4 0.4 0.4 0.4
Leverage Ratio (Total Asset / Total Equity) 1.9 2.0 2.0 2.2 2.4 2.4
Valuation Ratios
DPS (Rs.) 4.3 4.2 6.0 15.0 2.2 2.8
BVPS (Rs.) 88.9 97.5 104.1 99.0 107.5 118.4
EPS (Rs. Cr) 11.2 13.3 13.3 12.5 11.0 14.1
P / E (X) 12.1 10.2 10.2 10.8 12.3 9.6
P / BVPS (X) 1.5 1.4 1.3 1.4 1.3 1.1
Nov. 07, 2015
Q2 FY16 Result Update

6. e
6
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POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. •
Firm interest of the stock / Instrument (s): - No.
Choice’s Rating Rationale
The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a
stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next
12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least
5% over the next 12 months. Stocks between these bands are classified as Neutral.
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Q2 FY16 Result Update
Rating Legend
Rating Upside
BUY Absolute Return >15%
Accumulate Absolute Return Between 10-15%
Hold Absolute Return Between 0-10%
Reduce Absolute Return 0 To Negative 10%
Sell Absolute Return > Negative 10%
Institutional Equity Team
Name Designation Email id Contact No.
Ajay Kejriwal President ajay@choiceindia.com 022- 6707 9850
Sumeet Bagadia Head of Research sumeet.bagadia@choiceindia.com 022 - 6707 9830
Amit Singh VP - Institutional Sales amit.singh@choiceindia.com 022 - 6707 9852
Devendra Gaikwad Sr. Manager - Institutional Sales devendra.gaikwad@choiceindia.com 022 - 6707 9877
Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com 022 - 6707 9975
Satish Kumar Research Analyst satish.kumar@choiceindia.com 022 - 6707 9974
Kunal Parmar Research Associate kunal.parmar@choiceindia.com 022 - 6707 9982
Amit Pathania Research Associate amit.pathania@choiceindia.com 022 - 6707 9979
Vikas Chaudhari Research Associate vikas.chaudhari@choiceindia.com 022 - 6707 9988
Trirashmi Ghoderao Research Advisor trirashmi.ghoderao@choiceindia.com 022 - 6707 9972
Neeraj Yadav Research Advisor Neeraj.yadav@choiceindia.com 022 - 6707 9988
NTPC Ltd.
Date Recommendation CMP (Rs.) Target Price (Rs.)
07-Nov-2015 BUY 135 169
01-Aug-2015 BUY 135 169
23-Jul-2015 BUY 137 169