NTPC –Buy- Anand Rathi

We lower FY10 estimates because power generation was lower than estimated and fuel costs were higher. We retain our BUY rating given its strong balance sheet, clarity on capacity expansion, and long-term fuel supply and off-take tie-ups.

Central Electricity Authority’s (CEA) power generation data shows that NTPC generated 219 BU (2 BU short) in FY10. At our realization estimate of Rs2.26/kWh, we expect NTPC to report FY10 revenue of Rs474 billion, around Rs4.5bn lower than our earlier estimate. (Note: NTPC generated 4% more units than its target of 210 BU.)

International coal prices have shot up 50% (The RB Coal Index) in FY10, from $61/tonne to $94 now. Since the fuel cost would be passed on, profitability would not be affected, though actual recovery might have to be adjusted in tariffs of subsequent years. We assume it imported 12.5mt in FY10, 9% of the total coal consumption.

We lower FY10 revenue estimate by 1%, while maintaining those for FY11. We lower profit-after-tax estimate for FY10 by 6% and maintain those for FY11 and FY12. We value the stock at Rs249, based on a sum-of-parts valuation, which is 19.5x FY11e EPS and 3x FY11e BVPS.

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