Analysis Report : NTPC Quarterly result (BUY , Estimated Price : Rs. 160 per share)

Here is an interpretation made on the basis of these results and the company’s performance in a nut shell. 

In the 4^th quarter, company did perform well, with all the coal block scams and blockage from government. As the government is planning to provide 24X7 electricity, the power sector will require huge investment to withstand the growth. Moreover, the sector is turning towards environment friendly production which is yet to be implemented in various units. Due to the pressure of Coal Blocks and turning to green portfolio, NTPC witnessed a decline in Net sales but the use of better technology has increased their percentage of profit. And also with the news of disinvestment in this sector, the share price has witnessed a decline but as the auction of cola blocks is in the pipe line and the investments in Telangana, the NTPC shows long term growth phenomenon.

Other aspects like Power and Fuel cost has also declined indicating use of more efficient ways and process which will surely increase in future as NTPC is keen for green portfolio. The Power and Fuel cost in quarter 4, 2014-15 is almost 65% where as in the same quarter last year it was around 69%. With the growth rate promised by the government, the per capita power consumption which was 917.18 Kwh will definitely increase and thus providing new avenues to this sector. As NTPC has almost 25% of the production share in India, it is likely to increase with the developments. The EBIT of this quarter has shown a rise of 1.01% at 16.94% of the Net Sales as compared to the same of 15.93% in 2013.

Table 1: Ratio Analysis and comparison from Balance Sheet Published by NTPC

	Quarter 4 2014-15	Quarter 4 2013-14
EBIT	16.94%	15.93%
Power and Fuel Cost	65.11%	68.94%
Finance Expense	4.41%	3.21%
PBT	16.16%	16.00%
Tax Expense	1.11%	1.54%

Table 2: Power Generation Scenario in India[1]

	April '13-Jan '14	April '14-Jan '15
Thermal	9026	12294.4	36
Hydro	402	336.01	-16
Nuclear	0	1000	N/A
All India	9428	13630	45

If we take a look to the Profit before Tax, it has increased only by 0.16% in spite of the growth of thermal power plants in India. The reason behind such is NTPC’s investments in green power generation.

Figure 1: The Comparison of different attributes quarterly

Overall, the growth of the Company in long term seems pretty good which has led us to stick to our growth projections. We have used Discounted Cash Flow model to arrive at valuation for the Company. Our estimated price of NTPC is INR 160/share. Current Market Price is INR 131.05/share. The share is a good pick for long term investors.

About the Author

This report has been authored by Piyush Agarwal, a MBA student from Institute of Management, Nirma University, Ahmadabad, Gujarat, India.

Disclaimer

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidelines only.

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[1] GOI, Executive Summary Power Sector Report, January 2015

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