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NTPCSittingonagoldmine,yettodeliver

July04,2013

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware tha

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Rupa Shah

rupashah@plindia.com

+91-22-66322244

Rating Accumulate

Price Rs144

Target Price Rs179

Implied Upside 24.3%

Sensex 19,178

Nifty 5,771

(PricesasonJuly04,2013)

TradingdataMarket Cap. (Rs bn) 1,188.6

Shares o/s (m) 8,245.5

3M Avg. Daily value (Rs m) 770.3

MajorshareholdersPromoters 75.00%

Foreign 9.37%

Domestic Inst. 10.47%

Public & Other 5.16%

StockPerformance(%) 1M 6M 12MAbsolute (5.3) (8.5) (10.5)

Relative (3.1) (5.5) (20.5)

HowwedifferfromConsensusEPS(Rs) PL Cons. %Diff.2014 12.9 14.3 9.3

2015 13.8 15.7 12.3

PricePerformance(RIC:NTPC.BO,BB:NTPCIN)

Source:Bloomberg

0

50

100

150

200

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

(Rs)

NTPChasbeenallocatedfour coalminesby theMinistryofCoal (MOC)withan

aggregatereserveof2bntonnes.TwooftheseminesareinChhattisgarhandtwo

are inOrissa.A totalof14mineswereallocatedwithestimated reservesof8bn

tonnes

&

production

capacity

of

159mt

p.a

that

should

support

32000WMs.

! Status of the existing mines: Between 2004-07, NTPC had been allocated sixcoal blocks, namely PakriBarwadih, ChattiBariatu, Kerandari, Dulanga

Talaipalliand ChattiBariatu(S). Production pegged from these mines was to the

tune of 73m tonnes p.a (or 11000MWs) and the mining was to start in 2010. In

2012, three of the blocks, namely, Chatti Bariatu, Chatti Bariatu (S) and

Kerandari were deallocated on the grounds of a substantial delay in

development. Subsequently, they were reallocated to NTPC. The company is ye

to start producing from these mines and the total expenditure incurred on mine

development till March 2013 was to the tune of Rs12bn which is 10% of the

total cost. NTPC, however, is expected to start production from its Pakri

Barwadih mine from FY14E. The first year production will be close to 2m tonne

which is then expected to scale up to 40m tonnes by 2017. Even if the

production ramps up from PakriBarwadih, the KodermaHazaribaghBanadag

ShivpuriTori railway line, which will carry the output, is getting delayed

However, once these mines get operationalised, the company will earn

regulated returns on their investments too.

Contd2

Keyfinancials(Y/eMarch) 2012 2013 2014E 201Revenues (Rs m) 611,963 662,980 747,123 826,05

Growth(%) 11.4 8.3 12.7 10

EBITDA (Rs m) 131,938 177,381 185,561 196,84

PAT (Rs m) 82,608 91,858 106,650 113,4

EPS (Rs) 10.0 11.1 12.9 13

Growth(%) (6.5) 11.2 16.1 6

Net DPS (Rs) 3.9 4.2 4.2 5

Profitability&Valuation 2012 2013 2014E 201EBITDA

margin

(%)

21.6 26.8

24.8 23

RoE(%) 11.7 12.0 12.5 12

RoCE(%) 8.0 8.1 8.6 8

EV / sales (x) 2.5 2.4 2.3 2

EV / EBITDA (x) 11.4 8.9 9.3 9

PE (x) 14.4 12.9 11.1 10

P / BV (x) 1.6 1.5 1.3 1

Netdividendyield(%) 2.7 2.9 2.9 3

Source:CompanyData;PLResearch

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NTPC

! Valuation and Recommendation: NTPC commissioned close to 4000MWs(including JVs) in FY13 and is expected to add close to 1875MWs (including JVs)

in FY14E. CCEAs acceptance of coal price mechanism will help the company to

import coal to mitigate the shortfall in the Coal India supplies, if any. Though

host of reasons delayed NTPCs plans to develop captive mines, allocation

definitely provides fuel security for the future. NTPC offers one of the safest bet

in the current scenario as it has a generation assets earning regulated returns;

thus, safe guarding earnings shocks at a P/BVx of 1.2x FY15E. We maintain

Accumulate.

Exhibit1: CapexincurredonexistingminesMines CapextillMarch2013RsmPakri-Barwadih 9,550

Chatti-Bariatu 904

Kerandari 1,081

Dulanga 521

Talaipalli 1

Chatti-Bariatu (South) 0

Total 12,057

Source:CompanyData,PLResearch

Exhibit2: Blocksofferedon3rdJuly2013Chhattisgarh

Jilga-Barpali Baisi

Banai-NTPC Bhalmunda-NTPC

Kente Kerwa

JharkhandGowa Pachwara South

Kalyanpur-Badalpara

MaharashtraMahajanwadi

OdishaKundanali-Laburi-NTPC Sarapal-Nuapara

Tentuloi Chandrabila-NTPC

Brahamani

MadhyaPradeshGandbahera-Uhhenia

WestBengalDeocha-Pachami-Dewanganj-Harinsingha

Source:MOC,PLResearch

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NTPC

Exhibit3: BlocksallocatedtoNTPC

NLC

Odisha Thermal Power Corp

Jammu & Kashmir State Power Dev Corp

Chhattisgarh State Power Gen Co Ltd

Andhra Pradesh Generation Co

Maharashtra State Power Generation Co

Rajasthan Vidyut Utpadan Nigam

Punjab State Power Corp Ltd

Haryana Power Generation Corporation Limited

Tamil Nadu Power Generation Company

Gujarat State Electricity Corporation

M.P.Power Generation Company Limited

Karnataka Power Company

Source:CompanyData,PLResearch

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NTPC

IncomeStatement(Rsm)Y/eMarch 2012 2013 2014E 2015ENetRevenue 611,963 662,980 747,123 826,058Raw Material Expenses

Gross Profit 611,963 662,980 747,123 826,058

Employee Cost

Other Expenses 480,025 485,599 561,561 629,212EBITDA 131,938 177,381 185,561 196,846Depr. & Amortization 27,917 33,968 44,000 46,923

Net Interest 17,116 19,244 29,983 30,944

Other Income 36,858 47,566 28,691 32,196

ProfitbeforeTax 123,763 171,735 140,270 151,175Total Tax 31,024 39,592 33,679 37,806

ProfitafterTax 92,738 132,143 106,591 113,369Ex-Od items / Min. Int. 10,131 3 4,335 1 1

Adj.PAT 82,608 91,858 106,650 113,416Avg.SharesO/S(m) 8,245.5 8,245.5 8,245.5 8,245.5EPS(Rs.) 10.0 11.1 12.9 13.8

CashFlowAbstract(Rsm)Y/eMarch 2012 2013 2014E 2015EC/F from Operations 130,617 149,394 194,334 180,503

C/F from Investing (79,367) (327,625) (162,764) (141,310)

C/F from Financing (45,613) 179,418 (45,898) (18,889)

Inc. / Dec. in Cash 5,638 1,187 (14,327) 20,304

Opening Cash 161,853 167,490 168,677 154,350

Closing Cash 167,490 168,677 154,350 174,654

FCFF 45,035 (221,725) (52,639) 22,418

FCFE 95,555 (151,931) 80,768 88,156

KeyFinancialMetricsY/eMarch 2012 2013 2014E 2015EGrowthRevenue (%) 11.4 8.3 12.7 10.6

EBITDA (%) 4.9 34.4 4.6 6.1

PAT (%) (6.5) 11.2 16.1 6.3

EPS (%) (6.5) 11.2 16.1 6.3

ProfitabilityEBITDA Margin (%) 21.6 26.8 24.8 23.8

PAT Margin (%) 13.5 1 3.9 1 4.3 13.7

RoCE (%) 8.0 8.1 8.6 8.1

RoE (%) 11.7 12.0 12.5 12.2

BalanceSheetNet Debt : Equity 0.4 0.5 0.6 0.6

Net Wrkng Cap. (days) ValuationPER (x) 14.4 12.9 11.1 10.5

P / B (x) 1.6 1.5 1.3 1.2

EV / EBITDA (x) 11.4 8.9 9.3 9.0

EV / Sales (x) 2.5 2.4 2.3 2.1

EarningsQualityEff. Tax Rate 25.1 23.9 24.0 25.0

Other Inc / PBT 29.8 26.4 20.5 21.3

Eff. Depr. Rate (%) 3.4 3.0 3.4 3.3

FCFE / PAT 115.7 (165.4) 75.7 77.7

Source:CompanyData,PLResearch.

BalanceSheetAbstract(Rsm)Y/eMarch 2012 2013 2014E 2015EShareholder's Funds 732,912 803,876 900,734 963,464

Total Debt 482,403 552,197 685,603 751,341

Other Liabili ties 20,670 21,694 4,169 3,771

TotalLiabilities 1,235,984 1,377,766 1,590,506 1,718,576Net Fixed Assets 870,862 1,000,455 1,137,951 1,216,485Goodwill

Investments 112,064 107,601 132,124 148,434

Net Current Assets 253,058 269,708 320,428 353,653

Cash&Equivalents 167,490 168,677 154,350 174,654

OtherCurrentAssets 263,991 334,431 344,125 371,305

CurrentLiabilities 178,423 233,401 178,047 192,306

Other Assets 1 2 3 4

TotalAssets 1,235,985 1,377,766 1,590,506 1,718,576

QuarterlyFinancials(Rsm)Y/eMarch Q2FY13 Q3FY13 Q4FY13 Q1FY14ENetRevenue 161,197 157,749 164,618 164,122EBITDA 42,243 40,002 39 ,065 39,389%ofrevenue 26.2 25.4 23.7 24.0

Depr. & Amortization 7,865 8,288 10,213 10,222

Net Interest 3,035 5,304 5,912 5,412

Other Income 10,482 7,547 17,714 9,123

ProfitbeforeTax 41,825 33,957 57 ,495 32,878Total Tax 10,402 7,940 13,679 7,562

ProfitafterTax 31,424 26,018 43 ,816 25,316Adj.PAT 20,460 24,655 25 ,593 25,316

KeyOperatingMetricsY/e

March

2012

2013 2014E 2015E

Operating( Thermal) capacity (MWs) 28,708 33,885 36,368 40,368

Avg. Coal PLF (%) 88.0 83.0 87.0 84.0

Generation (Rs m) 202 230 254 272

Other Income/PAT (%) 40.0 35.3 26.9 28.4

Capex (Rs bn) 91 210 138 125

Capacity Commissioned (MWs) 2,320 4,130 3,500 4,000

Source:CompanyData,PLResearch.

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NTPC

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