Neutral NTPC Ltd for the Target Rs.381 by Motilal Oswal Financial Services Ltd
Capacity addition guidance maintained
* NTPC’s standalone revenue for 1QFY27 came in at INR438b (+3% YoY, +2% QoQ), 4% ahead of our estimate. APAT stood at INR51b (+16% YoY, -3% QoQ), beating our estimate by 17% as other expenses came in 20% below our estimate and 22% lower YoY. Consolidated revenue/EBITDA stood at INR507b/INR162b (+8%/+29% YoY), with profit from subsidiaries doubling YoY to INR12b.
* Key things we liked about the result:
1) management reaffirmed the FY27 capacity addition guidance of 9.5GW and targets a capacity of 150GW/250GW by FY32/FY37, with RE share in the mix rising to 40%/54%
2) consolidated regulated equity rose 9.3% YoY to INR1,217b
3) improvement in coal PLF to 76.7% (75.2% in 1QFY26) and in solar PLF to 31.1% from 26.8%.
* Key monitorables:
1) pace of NGEL commissioning, with consolidated renewable addition of only 595MW in 1QFY27 against the FY27 commissioning target of 8GW
2) we have observed delays as per CEA data in upcoming thermal projects, specifically Patratu (Unit-3), Lara and Talcher.
* Valuation and view: We have a Neutral rating on NTPC with a TP of INR381. Our TP is based on value of INR216 for the standalone, coal, and other businesses at FY28E P/B of 2x; value of INR20 for other subsidiaries at FY28E P/B of 2x and INR49 for JV/associates at FY28E P/B of 1.5x, and the stake in NGEL is valued at a 25% discount to the current market price.
Beat driven by lower-than-estimated other expenses Financial highlights
* NTPC reported its SA revenue at INR438b (+3% YoY, +2% QoQ), beating our estimate by 4%.
* EBITDA came in at INR126b (+23% YoY, +1% QoQ), 17% above our estimate, as EBITDA margin improved ~466bp YoY at 28.8%. Strong beat at the EBITDA level was mainly due to 20% lower-than-estimated other expenses (-22% YoY).
* APAT came in 17% above our estimate at INR51b (+16% YoY, -3% QoQ).
Valuation and view
Our TP of INR381 for NTPC is based on:
* Value of INR216 for the standalone, coal, and other businesses at FY28E P/B of 2x.
* Value of INR20 for other subsidiaries at FY28E P/B of 2x and INR49 for JV/associates at FY28E P/B of 1.5x P/B.
* The stake in NGEL is valued at a 25% discount to the current market price.
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