 "For NTPC, many positives in store")
Despite a lacklustre year for the power sector, the NTPC stock has managed to outperform the BSE Sensex year-to-date, much to the surprise of the Street. The September quarter results posted by NTPC gave a leg-up to the stock.
First, power generation in the September quarter was up 8.5 per cent year-on-year. This lifted revenues seven per cent. Net realisation per electricity unit inched up from Rs 1 a year ago to Rs 1.1 in the September quarter. As a result, operating profit jumped 14 per cent after almost six quarters of dismal performance. The start of operations at Koldam hydro power plant (800 megawatts or Mw) too boosted operating profit. Net profit jumped 40 per cent, largely due to tax refunds. Adjusted net profit (excluding one-offs) grew in line with operating profit at 14.4 per cent.
While NTPC has revised its capex target by nine per cent to Rs 25,000 crore in FY16 and by 20 per cent in FY17 to Rs 30,000 crore, it plans to increase its current capacity of 45,048 Mw by 23,500 Mw by FY19.
Further, increasing participation from state electricity boards (SEBs) in UDAY (Ujwal Discom Assurance Yojana) could prop up NTPC's revenues and strengthen SEBs' balance sheet.
SEBs with stronger balance sheets will be able to buy more power, benefiting NTPC. The second half of FY16 will also see Ratnagiri power plant start power supply to railways at Rs 4.75 per unit.
Though NTPC's operations were hit for a few quarters after the revised rate structure of CERC, things are improving. 30 of 41 analysts polled on Bloomberg recommend 'buy' on NTPC. Currently trading at 12 times one-year forward price earning, Nomura has a target price of Rs 175 for the stock. A favourable verdict on the appeal against CERC's pricing norms could be another trigger.
First, power generation in the September quarter was up 8.5 per cent year-on-year. This lifted revenues seven per cent. Net realisation per electricity unit inched up from Rs 1 a year ago to Rs 1.1 in the September quarter. As a result, operating profit jumped 14 per cent after almost six quarters of dismal performance. The start of operations at Koldam hydro power plant (800 megawatts or Mw) too boosted operating profit. Net profit jumped 40 per cent, largely due to tax refunds. Adjusted net profit (excluding one-offs) grew in line with operating profit at 14.4 per cent.
While NTPC has revised its capex target by nine per cent to Rs 25,000 crore in FY16 and by 20 per cent in FY17 to Rs 30,000 crore, it plans to increase its current capacity of 45,048 Mw by 23,500 Mw by FY19.
Further, increasing participation from state electricity boards (SEBs) in UDAY (Ujwal Discom Assurance Yojana) could prop up NTPC's revenues and strengthen SEBs' balance sheet.
SEBs with stronger balance sheets will be able to buy more power, benefiting NTPC. The second half of FY16 will also see Ratnagiri power plant start power supply to railways at Rs 4.75 per unit.
Though NTPC's operations were hit for a few quarters after the revised rate structure of CERC, things are improving. 30 of 41 analysts polled on Bloomberg recommend 'buy' on NTPC. Currently trading at 12 times one-year forward price earning, Nomura has a target price of Rs 175 for the stock. A favourable verdict on the appeal against CERC's pricing norms could be another trigger.