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NTPC

Sittingonagoldmine,yettodeliver
July04,2013 Rupa Shah rupashah@plindia.com +91-22-66322244

Rating Price Target Price Implied Upside Sensex Nifty (PricesasonJuly04,2013)

Accumulate Rs144 Rs179 24.3% 19,178 5,771

Tradingdata Market Cap. (Rs bn) Shares o/s (m) 3M Avg. Daily value (Rs m) Majorshareholders Promoters Foreign Domestic Inst. Public & Other StockPerformance (%) 1M 6M Absolute (5.3) (8.5) Relative (3.1) (5.5) HowwedifferfromConsensus EPS(Rs) PL Cons. 2014 12.9 14.3 2015 13.8 15.7

1,188.6 8,245.5 770.3 75.00% 9.37% 10.47% 5.16% 12M (10.5) (20.5) %Diff. 9.3 12.3

Status of the existing mines: Between 2004-07, NTPC had been allocated six coal blocks, namely PakriBarwadih, ChattiBariatu, Kerandari, Dulanga, Talaipalli and 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 yet 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

PricePerformance(RIC:NTPC.BO,BB:NTPCIN)
(Rs) 200 150 100 50 0
Nov-12 Jul-12 Sep-12 Mar-13 Jan-13 May-13 Jul-13

Keyfinancials(Y/eMarch) Revenues (Rs m) Growth(%) EBITDA (Rs m) PAT (Rs m) EPS (Rs) Growth(%) Net DPS (Rs) Profitability&Valuation EBITDAmargin(%) RoE(%) RoCE(%) EV / sales (x) EV / EBITDA (x) PE (x) P / BV (x) Netdividendyield(%) Source:CompanyData;PLResearch

2012 611,963 11.4 131,938 82,608 10.0 (6.5) 3.9 2012 21.6 11.7 8.0 2.5 11.4 14.4 1.6 2.7

2013 662,980 8.3 177,381 91,858 11.1 11.2 4.2 2013 26.8 12.0 8.1 2.4 8.9 12.9 1.5 2.9

2014E 747,123 12.7 185,561 106,650 12.9 16.1 4.2 2014E 24.8 12.5 8.6 2.3 9.3 11.1 1.3 2.9

2015E 826,058 10.6 196,846 113,416 13.8 6.3 5.0 2015E 23.8 12.2 8.1 2.1 9.0 10.5 1.2 3.5

Source:Bloomberg

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 that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. Please refer to important disclosures and disclaimers at the end of the report

EventUpdate

NTPC has been allocated four coal mines by the Ministry of Coal (MOC) with an aggregate reserve of 2bn tonnes. Two of these mines are in Chhattisgarh and two are in Orissa. A total of 14 mines were allocated with estimated reserves of 8bn tonnes&productioncapacityof159mtp.athatshouldsupport32000WMs.

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: Capexincurredonexistingmines Mines Pakri-Barwadih Chatti-Bariatu Kerandari Dulanga Talaipalli Chatti-Bariatu (South) Total Source:CompanyData,PLResearch Exhibit2: Blocksofferedon3rdJuly2013 Chhattisgarh Jilga-Barpali Banai-NTPC Kente Jharkhand Gowa Kalyanpur-Badalpara Maharashtra Mahajanwadi Odisha Kundanali-Laburi-NTPC Tentuloi Brahamani MadhyaPradesh Gandbahera-Uhhenia WestBengal Deocha-Pachami-Dewanganj-Harinsingha Source:MOC,PLResearch Sarapal-Nuapara Chandrabila-NTPC Pachwara South Baisi Bhalmunda-NTPC Kerwa CapextillMarch2013Rsm 9,550 904 1,081 521 1 0 12,057

July 04, 2013

NTPC

Exhibit3: Blocksallocatedto NTPC 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

July 04, 2013

NTPC
IncomeStatement(Rsm) Y/eMarch 2012
NetRevenue Raw Material Expenses Gross Profit Employee Cost Other Expenses EBITDA Depr. & Amortization Net Interest Other Income ProfitbeforeTax Total Tax ProfitafterTax Ex-Od items / Min. Int. Adj.PAT Avg.SharesO/S(m) EPS(Rs.) 611,963 611,963 480,025 131,938 27,917 17,116 36,858 123,763 31,024 92,738 10,131 82,608 8,245.5 10.0

2013
662,980 662,980 485,599 177,381 33,968 19,244 47,566 171,735 39,592 132,143 34,335 91,858 8,245.5 11.1

2014E
747,123 747,123 561,561 185,561 44,000 29,983 28,691 140,270 33,679 106,591 1 106,650 8,245.5 12.9

2015E
826,058 826,058 629,212 196,846 46,923 30,944 32,196 151,175 37,806 113,369 1 113,416 8,245.5 13.8

BalanceSheetAbstract(Rsm) Y/eMarch 2012


Shareholder's Funds Total Debt Other Liabilities TotalLiabilities Net Fixed Assets Goodwill Investments Net Current Assets Cash&Equivalents OtherCurrentAssets CurrentLiabilities Other Assets TotalAssets

2013

2014E

2015E
963,464 751,341 3,771 1,718,576 1,216,485 148,434 353,653 174,654 371,305 192,306 4 1,718,576

732,912 803,876 900,734 482,403 552,197 685,603 20,670 21,694 4,169 1,235,984 1,377,766 1,590,506 870,862 1,000,455 1,137,951 112,064 107,601 132,124 253,058 269,708 320,428 167,490 168,677 154,350 263,991 334,431 344,125 178,423 233,401 178,047 1 2 3 1,235,985 1,377,766 1,590,506

CashFlowAbstract(Rsm) Y/eMarch
C/F from Operations C/F from Investing C/F from Financing Inc. / Dec. in Cash Opening Cash Closing Cash FCFF FCFE

2012
130,617 (79,367) (45,613) 5,638 161,853 167,490 45,035 95,555

2013
149,394 (327,625) 179,418 1,187 167,490 168,677 (221,725) (151,931)

2014E
194,334 (162,764) (45,898) (14,327) 168,677 154,350 (52,639) 80,768

2015E
180,503 (141,310) (18,889) 20,304 154,350 174,654 22,418 88,156

QuarterlyFinancials(Rsm) Y/eMarch Q2FY13


NetRevenue EBITDA %ofrevenue Depr. & Amortization Net Interest Other Income ProfitbeforeTax Total Tax ProfitafterTax Adj.PAT 161,197 42,243 26.2 7,865 3,035 10,482 41,825 10,402 31,424 20,460

Q3FY13
157,749 40,002 25.4 8,288 5,304 7,547 33,957 7,940 26,018 24,655

Q4FY13 Q1FY14E
164,618 39,065 23.7 10,213 5,912 17,714 57,495 13,679 43,816 25,593 164,122 39,389 24.0 10,222 5,412 9,123 32,878 7,562 25,316 25,316

KeyFinancialMetrics Y/eMarch Growth


Revenue (%) EBITDA (%) PAT (%) EPS (%)

2012
11.4 4.9 (6.5) (6.5)

2013
8.3 34.4 11.2 11.2

2014E
12.7 4.6 16.1 16.1

2015E
10.6 6.1 6.3 6.3 23.8 13.7 8.1 12.2 0.6 10.5 1.2 9.0 2.1 25.0 21.3 3.3 77.7

KeyOperatingMetrics Y/eMarch
Operating( Thermal) capacity (MWs) Avg. Coal PLF (%) Generation (Rs m) Other Income/PAT (%) Capex (Rs bn) Capacity Commissioned (MWs) Source:CompanyData,PLResearch.

2012
28,708 88.0 202 40.0 91 2,320

2013
33,885 83.0 230 35.3 210 4,130

2014E
36,368 87.0 254 26.9 138 3,500

2015E
40,368 84.0 272 28.4 125 4,000

Profitability
EBITDA Margin (%) PAT Margin (%) RoCE (%) RoE (%) 21.6 13.5 8.0 11.7

26.8 13.9 8.1 12.0

24.8 14.3 8.6 12.5

BalanceSheet
Net Debt : Equity Net Wrkng Cap. (days) 0.4

0.5

0.6

Valuation
PER (x) P / B (x) EV / EBITDA (x) EV / Sales (x) 14.4 1.6 11.4 2.5

12.9 1.5 8.9 2.4

11.1 1.3 9.3 2.3

EarningsQuality
Eff. Tax Rate 25.1 Other Inc / PBT 29.8 Eff. Depr. Rate (%) 3.4 FCFE / PAT 115.7 Source:CompanyData,PLResearch.

23.9 26.4 3.0 (165.4)

24.0 20.5 3.4 75.7

July 04, 2013

NTPC

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60%

53.8%

%of TotalCoverage

50% 40% 30% 20% 10% 0% BUY Accumulate Reduce

23.5%

21.8%

0.8% Sell

Accumulate Sell TradingSell UnderReview(UR) : : : : Outperformance to Sensex over 12-months Over 15% underperformance to Sensex over 12-months Over 10% absolute decline in 1-month Rating likely to change shortly

PLsRecommendationNomenclature
BUY Reduce TradingBuy NotRated(NR) : : : :

Over 15% Outperformance to Sensex over 12-months Underperformance to Sensex over 12-months Over 10% absolute upside in 1-month No specific call on the stock

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July 04, 2013