NTPC: Decent numbers

Reasonably good numbers for March quarter, expansion plans cushion stock amid falling markets.

The NTPC stock has not fallen as much as the broader markets since the company posted reasonably good numbers for the March 2010 quarter. Though net profit fell 4.5 per cent year-on-year (y-o-y) to Rs 2,017.65 crore on a standalone basis, this dent was largely contributed by a deferred tax payment of Rs 159.4 crore.

Top-line growth for the same quarter was 7.9 per cent y-o-y at Rs 12,353 crore. Operating profit showed a healthy gain of 20 per cent, while operating margin improved 220 basis points. The margin could have been even better had it not been for the Rs 330-crore increase in fuel costs over the previous year.

Consolidated results for the full year were robust. While top line improved 13 per cent to Rs 48,256 crore in FY10, operating profits increased 24 per cent and operating margins expanded 237 basis points. Net profit at Rs 8,837 crore showed a growth of 9 per cent over the previous year. Profit margins, however, fell 67 basis points in the backdrop of an increase in taxes.

The company is working on a capacity expansion plan of Rs 20,000 crore, which will be funded by debt and equity so as to maintain its present debt-equity ratio. With this, NTPC will increase its capacity from present 31,000 Mw to 51,000 Mw by 2012. It also plans boosting capacity to 75,000 Mw by 2017.

NTPC is working on ensuring fuel security, too. For current production capacity, the entire coal requirement will be fulfiled by Coal India. Further, work is in progress in its joint venture (JV) with Coal India for developing a block in eastern coal fields. On the international front, efforts are on for ensuring long-term coal linkages, and agreements with international coal producers and even acquisition of stakes in coal companies abroad are being worked out.

There are opportunities for the company in the nuclear energy space too, where it has formed a JV with Nuclear Power Corporation (NPC) for a 2,000-Mw plant where NTPC will hold 49 per cent.

Looking at the capex plans, works on coal linkages as well as opportunities in nuclear power space, NTPC is a good long-term story and trades at 19 times FY10 earnings.