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| NTPC: Concerns over capacity addition |
| Shobhana Subramanian / Mumbai May 28, 2009, 00:02 IST |
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For the March 2009 quarter, better realisations as well as a rise in volumes helped NTPC report 9 per cent y-o-y growth in sales. However, higher fuel expenses and a surge in employee costs dented operating profits, which fell 8.4 per cent. As a result, its operating profit margin was down around 470 basis points to 24.5 per cent.
One-time exceptional items, including a tax refund, helped NTPC’s net profit rise 58 per cent in the March 2009 quarter. But if these items were removed, net profit would have been lower than in the March 2008 quarter.
Last year, the company commissioned 1,000 Mw of new power generation capacity, which was way short of its target of 2,800 Mw. NTPC is now targeting 3,300 Mw new power generation capacity in 2009-10. But analysts are not convinced and except a little over half the targeted capacity to come up. They also expect NTPC to miss its capacity addition target of 22,400 Mw in the 11th Five-Year Plan. The inability to meet targets is consequent to project delays, which are partly on account of slippages in equipment supply and non-availability of adequate fuel.
For 2009-10, analysts are expecting NTPC’s revenue and net profit to grow about 10 per cent, resulting in an EPS (earning per share) of Rs 10.5 per share and an estimated book value of Rs 76.5.
After its March 2009 quarter results, most analysts have scaled down their stock price targets for NTPC due to concerns over higher valuations and potential delays in capacity addition. At current levels of Rs 202, analysts believe the stock is expensive at 2.6 times its estimated 2009-10 book value. They expect the stock to underperform the broader markets.
Associated with Vishal Chhabaria and Jitendra Kumar Gupta
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