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Good operational performance

NTPC reports good operational numbers in Q1FY22 despite being impacted by onetime charges. While reported standalone (SA)/consolidated (cons.) PAT was Rs31.4bn/ Rs34.4bn, up 27%/17% YoY, adjusted PAT was Rs31.6bn/Rs38.1bn, up 0.8%/5.3% YoY, respectively. One-time charges in the quarter were due to Rs2bn QoQ decline in LPS and Rs3.5bn higher deferred tax (on cons. PBT) paid for solar projects to be adjusted over the next few quarters.

Core earnings continued to be strong backed by capacity addition. NTPC aims to add 13GW RE capacity by FY24 which is part of its target to reach 60GW RE capacity by CY32. It recently won another 325MW solar project at Rewa, MP, and will participate in 5GW CPSU scheme. Maintain BUY.

* Good operational performance: In Q1FY22, cons. adj. PAT was Rs38.1bn (up 5.3% YoY), while reported PAT was Rs34.4bn (up 17% YoY), and revenue was Rs299bn (up 14% YoY). Standalone adjusted PAT was Rs31.6bn (up 0.8% YoY) while reported PAT was Rs31.4bn (up 27% YoY). Revenue was Rs260.4bn (up 11% YoY). Other income was 54% lower QoQ mainly due to Rs2bn decline in LPS. There was a one-time negative impact of Rs3.5bn on consolidated PAT due to higher deferred tax payment done for solar projects which will be commissioned in H2FY22 (thus adjustable).

Standalone/group gross generation was 71.4BU/85.8BU, up 18.8%/26.3% YoY. Coal PLF was up 1,146bps at 69.7%. Average tariff was slightly lower at Rs3.91/unit. Total commercial/installed capacity of NTPC group was 64.5GW/66.1GW while for standalone it was 51.8GW/52.6GW. Capacity addition targets: FY22 – 5GW thermal and 1.1GW RE; FY23 – 4.9GW thermal and 5GW RE. FY22 capex target is Rs237bn.

* RE projects on track; wins another 325MW solar project: In order to achieve RE targets of 60GW by CY32, NTPC RE won 325MW bid to set up solar plants at Shajapur, MP in the recent auctions conducted by Rewa Ultra Mega Solar. NTPC Renewables won 105MW quoting Rs2.35/unit, and 220MW quoting Rs2.33/unit. NTPC’s RE commissioning target by FY24 is >13GW to reach 15GW. Current operational RE capacity is 1.35GW while 3.2GW is under implementation and 3GW is under various stages of tendering. NTPC will participate in 5GW of upcoming auctions and also the CPSU scheme. Yearwise cumulative RE capacity addition targets: FY22 - 3GW, FY23 - 8GW, FY24 -15GW.

* Invites EoI for direct bulk power procurement: NTPC released an EoI inviting discoms / bulk consumers/ corporates/ industrial consumers to procure its spare power on RTC / specific hours of the day basis through ST / MT / LT PPAs. Most NTPC capacity is tied up under LT PPAs (except Dadri TPP where Delhi’s 621MW has been de-allocated after CERC approval of PPA relinquishment beyond 25 years, and Rajasthan, which has stopped procurement of 410MW from Anta).

It also proposed to supply green power and manage the entire power purchase portfolio of consumers through NVVN. NTPC has >16GW capacity with >24 years of operations. However, most are pit-head with very low variable costs (only Dadri and Unchahar have variable cost >Rs3/unit). Thus, even if more states take the Delhi approach, open capacities can be tied up through this route.

* Maintain BUY with an unchanged target price of Rs165/share. It is currently trading at FY23E standalone P/BV of 0.8x (P/E of 6.3x) and FY23E consolidated P/E of 5.5x.

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