Stable business model may boost NTPC stock
NTPC’s Sept earnings were along the expected lines, but a decline in dependence on fuel from CIL may ensure higher plant availability factor.
By Suraj Sowkar, ET Bureau |
While NTPC’s September quarter earnings were along the expected lines, a decline in dependence on fuel from Coal India due to production at captive mines may ensure higher plant availability factor, or PAF, at its generation units in the coming quarters.
In the quarter under review, NTPC benefitted from lower hydropower generation in the September quarter.
The temporary closure of hydropower plants in the Himalayan states led to higher demand for NTPC. In addition to this, better coal supplies helped the company increase generation. As a result, capacity utilisation or plant load factor at coalbased plants improved 100 basis points to 75.9%. However, gains were offset by declining gas availability that has hit plants that run on the fuel. Overall, gross power generation in the September quarter rose 2% to 54.5 billion units from the year earlier.
In the first half of the financial year, the company added 500 MW of capacity, taking the total to 41,184 MW. During the 12fth Five-Year Plan (FY13-17), it intends to add nearly 14,000 MW of capacity. NTPC has already commissioned onethird of the planned capacity addition.
Considering the healthy balance sheet and execution track record, NTPC is in a good position to achieve its target. As of September, the company had a debt-to-equity ratio of 0.7, which is one of the best in the industry.
NTPC expects to start production at its Pakri-Barwadih captive mine in a few days. By the end of this fiscal, it expects to mine nearly three million tonne of coal. The company used 37 MT of coal in the September quarter. The company has 10 captive mines and plans to bid for more. The stock is trading at a price-to-book value (P/BV) of 1.5. This is lower than the fiveyear historical average of 2.2.
A stable business model and timely execution of projects will lead to the stock outperforming its peers in the next few quarters.
In the quarter under review, NTPC benefitted from lower hydropower generation in the September quarter.
The temporary closure of hydropower plants in the Himalayan states led to higher demand for NTPC. In addition to this, better coal supplies helped the company increase generation. As a result, capacity utilisation or plant load factor at coalbased plants improved 100 basis points to 75.9%. However, gains were offset by declining gas availability that has hit plants that run on the fuel. Overall, gross power generation in the September quarter rose 2% to 54.5 billion units from the year earlier.
In the first half of the financial year, the company added 500 MW of capacity, taking the total to 41,184 MW. During the 12fth Five-Year Plan (FY13-17), it intends to add nearly 14,000 MW of capacity. NTPC has already commissioned onethird of the planned capacity addition.
Considering the healthy balance sheet and execution track record, NTPC is in a good position to achieve its target. As of September, the company had a debt-to-equity ratio of 0.7, which is one of the best in the industry.
NTPC expects to start production at its Pakri-Barwadih captive mine in a few days. By the end of this fiscal, it expects to mine nearly three million tonne of coal. The company used 37 MT of coal in the September quarter. The company has 10 captive mines and plans to bid for more. The stock is trading at a price-to-book value (P/BV) of 1.5. This is lower than the fiveyear historical average of 2.2.
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A stable business model and timely execution of projects will lead to the stock outperforming its peers in the next few quarters.
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