Strong growth outlook, captive production lend steam to NTPC

Prospects for power generators improving, with capacity expansions providing some medium-term visibility

NTPC, India’s premier power generator, had a strong Q4 in FY21. Revenues from operations fell 0.9 per cent to ~30,102 crore from ~30,390 crore a year ago. But profit after tax (PAT) surged to ~4,649 crore from ~1,630 crore. This was due to a tax refund of ~968 crore versus tax paid on ~4,958 crore YOY.

Consolidated FY21 revenues from operations were up to more than ~1.11 trillion from about ~1.1 trillion.

PAT for FY21 was up 25.8 per cent to ~14,969 crore versus ~11,902 crore. Tax paid was down 74 per cent to ~2,420 crore from ~9,347 crore in the previous financial year. Depreciation and amortisation rose to ~12,450 crore from ~10,356 crore YOY.

Among other ratios, FY21 EPS (earnings per share) almost doubled to ~12.93 from ~6.8 a year ago — a buyback slightly reduced the equity base.

The debt-equity ratio was stable at 1.55, while debt service cover rose slightly to 2x from 1.97x.

The cash flow statement indicates NTPC invested ~23,312 crore in new plants and other assets in FY21 whereas in the previous financial year it sunk ~18,230 crore in such assets and also ~11,500 crore in the acquisition of NEEPCO and THDCIL.

Unit power sales rose 4.8 per cent to 251.7 billion units (290 billion units, taking the subsidiaries into consideration). This is excellent, given that Q1FY21 was almost a washout owing to the lockdown and GDP contracted through the fiscal year.

Utilisation levels of coalbased plants dropped, with the plant load factor (PLF) down to 66 per cent from 68.2 per cent YOY. The average tariff was ~3.77 a unit, a YOY drop of 3.3 per cent. Payment was eased by the bailout of discoms, which enabled faster payments of dues. Receivables dropped by ~1,400 crore as a result.

The installed capacity is now 65,825 Mw and it intends to expand this to 130,000 Mw by 2032 with 30 per cent of the total being non-thermal. This breaks up as 32,000 Mw renewables, 5,000 Mw hydro, and another 2,000 Mw nuclear. The action plan involves capital expenditure of over ~1 trillion for 2019-2024.

The renewables target has been almost doubled to 60 Gw by 2032 (earlier 32 Gw). This implies adding 5– 5.5 Gw per annum.

NTPC has ramped up the production of captive coal. The estimated financing cost of loans for the solar arm is 6.5 per cent. But while lower financing costs are a plus, competition is also pushing solar tariff bids lower.

Analysts believe there could be 12 per cent growth in regulated returns on equity tariffs over the next two fiscal years. Coal prices have risen globally in the past five months, and further rise is likely. NTPC has some protection due to its captive production.

Growth should accelerate this fiscal year since GDP is expected to grow after the 2020-21 contraction. Discom insolvency has not really been solved, however. So, there could be payment issues unless central support continues.

The stock is up around 4 per cent since the results were declared, closing at ~118. Motilal Oswal Securities has a one-year target of ~145.